THE INTERDEPENDENCE OF THE BRAZILIAN STATE

Throughout the history of Brazil, we have traveled an extensive journey towards the consolidation of a national identity and, with it, the realization of the interdependence that should unite us in the construction of our destiny.

These postulates highlight a fundamental aspect of any civilized society: the preservation of coexistence. All existing rules seek to preserve peaceful relationships between people, environmental sustainability, overcoming social inequalities, seeking justice and social harmony. There is a clear sense of utopia that, as the filmmaker Fernando Birri taught; “Utopia is there on the horizon. I approach two steps, she moves two steps away. I walk ten steps and the horizon runs ten steps. As far as I walk, I will never reach. What is utopia for? That's what it's for: so that I don't stop walking.”

Life in society presupposes recognition and the need to preserve our relationships, permanently encouraging ethics, inclusion, diversity, postures that, lately, have also been valued in the corporate environment with the adoption of ESG metrics, bringing companies, finally, the defense of human rights.

However, actions aimed at strengthening coexistence are threatened. The political debate attests to a radicalization that distances understanding, opposing opinions are violently attacked, without attachment to argumentation, and the “cancel culture” spreads. The opposite is not an adversary but an enemy.

This environment has deep roots in our history. Disrespect for rights are plentiful, sponsored by government officials and supported by parts of society – increasingly suspicious according to a global survey by the Ipsos Institute. The investigation released by Veja shows that when asked “Do you trust others?” made to 22 people in thirty countries, Brazil appears in last place.

Corruption scandals, the sense of impunity that contaminates the whole of society, the profound inequality and certainly difficulty in enforcing the most basic consumer rights are clearly harmful to our coexistence. Yes, our past and what we are living in the present are not encouraging, but they can serve as fuel to change the future.

By remembering that our mutual dependence is the reality that should mean union and that it is possible to overcome our countless difficulties with dialogue, tolerance, without subservience. Thus, we can question and find ways. Utopia? Perhaps, but as Birri taught, this should be our way.

The taxpayer and the state

The thinker Alceu de Amoroso Lima taught that “Brazil began at the end” since when we were found, the State, Portuguese sovereignty imposed itself, the people came later.

I use this phrase to demonstrate that the power of the State is decisive in the Brazilian reality. We know the difficult relationship that the citizen has with the public power. Notwithstanding article 5 of the Federal Constitution defining our fundamental rights and guarantees as stony clauses, the recognition and practice of these rights faces great difficulties on a day-to-day basis. It is common for rulers to confuse the State with the government and the latter with their political parties and personal interests.

The tax area reproduces these difficulties. The tax action, with the argument that it is defending the public interests of the treasury, sometimes goes beyond limits in the interpretation of the law, through decrees, ordinances and regulations, pointing to the taxpayer the path of administrative and judicial litigation. Thus, it is not surprising that we have the largest tax litigation in the world, with more than BRL 5.0 trillion under discussion.

Aware of this context, the ETCO Institute, at the suggestion of the chairman of its Advisory Board, doctor Everardo Maciel, contracted, together with the EY consultancy, a technical study on the instruments of defense and protection of the taxpayer in Brazilian legislation and in international comparative tax law. The following were addressed: Current scenario; The Brazilian taxpayer at the federal and state levels (with the mapping of existing constitutional and infra-constitutional norms) Comparative analysis: foreign instruments to protect the taxpayer. The proposal is to identify how the taxpayer is treated in Brazil and in countries with the best practices so that we can reflect on how to evolve in the taxpayer's relationship with the tax authorities, a point directly linked to improving the business environment and strengthening the legal security of citizens and companies.

The study presented data that demonstrate that, despite initiatives such as the Tax Cooperative Compliance Program (Confia) of the Federal Revenue and Tax Compliance Programs in the States, the rate of taxpayer dissatisfaction with the services provided (Research of the Federal Revenue) in 2021 had an average of 74%.

Read also: Solutions for tax litigation — ETCO Magazine brings contributions from 27 names involved in the subject from different points of view

Alongside this finding, aspects that deserve attention were identified: Provision of taxpayer rights dispersed in various legal provisions and regulations, making it difficult for the taxpayer to understand their guarantees; Imposition of an aggravated fine before the actual proof of possible fraud, with a focus on large taxpayers; Absence of different treatments for taxpayers, occasional, repeated and persistent, in breach of the principle of equity; Expressive percentage of application of tax representation for criminal purposes, whose taxpayer data are published before completion in the administrative sphere; Absence of tax administration performance assessment initiatives through international tools, which were adopted by some of the federated entities, such as the TADAT (Tax Administration Diagnostic Assessment Tool), which identified that we are among the lowest rates of efficient dispute resolution tributaries in the world, among other findings.

At the state level, 12 Brazilian states were identified that adopted the positivization of taxpayer rights and guarantees through codes, in addition to the Federal District: Ceará, Espírito Santo, Goiás, Maranhão, Mato Grosso do Sul, Minas Gerais, Pará, Paraná, Piauí , Rio Grande do Sul, Santa Catarina and São Paulo.

In comparison with the best practices, three countries were evaluated: USA; Germany and Australia. In all of them there are laws aimed at defending the rights of taxpayers, with emphasis in the US for the Taxpayer First Act with a focus on taxpayer service and inspection procedures; Taxpayers Advocate Services (TAS) which, within the scope of the Internal Revenue Service (IRS), is the independent taxpayer defense body; Taxpayer Advocacy Panel (TAP) IRS federal advisory committee that assists in identifying tax issues relevant to the taxpayer; And the express provision of contact with superiors under the terms of item 2 of the Taxpayer Bill of Rights, ensuring the right to a quality service that includes the possibility of contacting superiors of tax agents in case of problems during inspections.

In Australia, as in the USA, taxpayers' rights are recognized through the Taxpayers' Charter, highlighting the following positions: Right to be heard, taxpayers have the right to be heard in the course of the administrative process; The Australian Taxation Office (ATO) undertakes to assist the taxpayer when necessary, explain its manifestations, respond to the taxpayer's requests and promote its effective service and the right of representation before the ATO and even to question the ATO which will explain the procedures possible, in case the taxpayer decides to appeal a decision of the agency, it will seek quick resolution of the problems and will keep the taxpayer informed.

Finally, in Germany, the adoption of the preliminary defense (Anhörung Beteiligter) was identified, in which the taxpayer has the right to a preliminary hearing, which precedes administrative acts that “would impact the rights of the party involved”, and also the hearing at the end of the inspection ( Schlussbesprechung) that takes place after delivery, by the taxpayer, of all documents and information requested by the tax authorities. If the authorities identify any irregularities, the hearing is mandatory.

The aforementioned study demonstrates that we must advance in improving the relationship between the tax authorities and the taxpayer and that legislative measures, such as PL 17/22, instituting general rules regarding the rights, guarantees and duties of the taxpayer should not be considered acts against the tax authorities and agents, but of balance, overcoming ancient quarrels between the Brazilian State and its citizens.

Taxpayer rights and tax justice

For a long time, a tax reform has been defended that is structuring of a model that makes fiscal and tax justice feasible, that is, that reduces social inequality and incorporates some principles, such as efficiency, equity, simplicity, stimulating competitiveness and combating those who pervert the system, not paying taxes intentionally. For this purpose, it is important to value the taxpayer and curb what we call “constant debtor”, so that the taxes collected are destined to meet the demands of society and that the State receives what is effectively due, nothing more.

However, it is feasible — before we achieve a tax reform that deserves the name — to have legislation that simplifies the system, combating deviations and facilitating collection. The Brazilian Institute of Competition Ethics — ETCO, has, since its foundation in 2003, contributed with technical studies, presenting suggestions for the improvement of relations between the tax authorities and the taxpayer. We identified that it is urgent to remove inaccuracies that encourage litigation, causing damage to both parties. The taxpayer wants its tax regularization and the treasury needs to receive it, however, these objectives are not achieved in the face of the troubled system in force. The taxpayer cannot be treated as an enemy and the tax authorities as an executioner.

In 2019, to present the serious situation we face, ETCO contracted an international study with the consultancy EY dealing with the tax litigation. A bleak picture was presented, nothing comparable with other countries: at the federal level alone, around R$ 3,4 trillion were being discussed in administrative and judicial instances. To face this debacle, we point out, looking to the past, the need to improve the tax transaction and, for the future, the adoption of mediation and tax arbitration. For the first situation, we stimulated this discussion in seminars with the PGFN and tax lawyers and, at the initiative of the federal government, Law 13.988/2020 was approved, which was reinforced by Law 14.375/2022. These provisions and the action of PGFN resulted in clear advances, allowing the solution of old pending issues. The taxpayer regularizes himself and the tax authorities collect. With regard to mediation and arbitration, we have bills in the States and in the National Congress, which should advance.

Validating the expression “separating the wheat from the chaff”, while we defend a new tax-taxpayer relationship, reducing the endless and harmful disputes to those who act in good faith, we need to fight those who take advantage of the existing confusing situation for the collection of taxes and if benefits, by structuring its actions to never pay taxes, the aforementioned “constant debtor” who has active debts with the federal tax authorities of R$ 100 billion, only in the fuel and tobacco sectors. We have a Bill in the Federal Senate (PLS 284/17) defining who should be considered a persistent debtor, differentiating them from occasional debtors and even repeated ones. It is in plenary and, without a reason that can be understood, is not voted on.

The most recent ETCO initiative is a new international study with the consultancy EY — which is in its final phase — dealing with taxpayer rights, presenting a diagnosis of our constitutional and infra-constitutional legislation and evaluating the posture of countries with the best practices (USA, Germany and Australia). The objective is to measure, as we did in the study of litigation, how the taxpayer is treated and what suggestions can be made to guarantee rights and define duties, with the objective of establishing a new level in this relationship, today of animosity, for an attitude of greater understanding and accuracy of the obligations, which is in the interest of the State and of citizens in good faith.

Thus, we must, for example, combat possible abuses, such as the normalization of tax representation for criminal purposes and the application of fines increased by up to 150%, without criteria.

This work by ETCO found in 17 / 2022 Bill, authored by Deputy Felipe Rigoni, demonstrating how important this initiative is to achieve a balance in more citizen-oriented coexistence in the fiscal sphere. That must be the goal.

At the public hearing held by the Finance and Taxation Commission of the Federal Chamber, ETCO demonstrated that PL 17/22 should consolidate taxpayer rights without inhibiting the legitimate action of the tax authorities. This bill should not be seen as a measure against the tax authorities or against fiscal presence, in fact, for the exercise of this action it is the duty of the public agent to defend rights and define duties. In this sense, the reduction of litigation; the valuation of good faith, support the composition before the imposition of penalty, allowing the taxpayer to point out facts and documents are measures that, far from defending tax evaders, demonstrate a sense of respect for citizens and companies, for the benefit of the work of inspection, which does not aim to punish, but to collect what is fair. It is important to point out that the countries that contributed to the ETCO/EY study, recognized as rigorous in the efficient fight against tax evaders, encourage the defense of taxpayers. The US, for example, has the “Taxpayers Bill of Rights”. Once the tax and its value are defined, the tax authorities' action is strengthened.

Of course, the bill can and should be improved, but it is not credible that it will be discredited. This stance removes seriousness from criticism. Why don't we have a law that guarantees taxpayer rights and points out duties and that, once established, are fulfilled?

In order to strengthen legal certainty, it is necessary that we have, on the one hand, the exact definition of the tax due, simplifying its payment and the efficiency of collection, avoiding excessive litigation and, on the other hand, a law that combats tax evaders and persistent debtors.

This is the path that should represent advances in the search for tax justice, even before we reach an effective tax reform.

*Edson Luiz Vismona is a lawyer, president of the Brazilian Institute of Competition Ethics (ETCO) and of the National Forum Against Piracy and Illegality (FNCP). He was secretary of justice and defense of citizenship of the State of São Paulo (2000/2002)

Smuggling, threat to national sovereignty

In an article published in the Jornal Correio Braziliense, dated 15/08, the president of ETCO, Edson Vismona, talks about the lack of Brazilian competitiveness, caused by the legal uncertainty and the wrong commercial and regulatory rules.

 

CONTRABANDO, THREAT TO NATIONAL SOVEREIGNTY

by Edson Vismona

 

Among the main problems of the lack of Brazilian competitiveness are legal uncertainty and the existing commercial and regulatory differences, including between countries.

In the classic and correct view of business analysis, they are factors that inhibit investment and, therefore, the generation of jobs and income. On the other hand, less visible, as it is more complex and difficult to control, asymmetric conditions of competition are formed, the entry of products via Ile-gals is favored, in the first moment, reaching the peak of the existence of companies that falsify even the illegal version of products, or even that use tax mechanisms to perpetuate their bad faith action, in a persistent way.

The case of cigarettes is emblematic of this problem. Efficiently, product consumption reduction programs have reached quite satisfactory levels. However, the measurement of the dose of the medicine not only affected the national industry but also facilitated the growth of crime, which today accounts for 45% of the Brazilian cigarette market. The question is then, who takes care of this market and its harmful effects on the population? The certainty we have is that the worsening of the current measures will generate clear and objective favoring the neighboring country, a decrease in Brazilian industrial activity and the growth of crime, benefited by smuggling, orchestrated by criminal organizations that expand their power.

In Paraguay, for example, cigarettes are taxed at just 16%, while in Brazil companies in the sector pay, on average, 70% of taxes on products legally manufactured. In addition, manufacturers in the neighboring country are not required by their government to comply with standards similar to those imposed by Brazilian authorities, such as the placement of warning phrases and images on packaging, which, by law, must occupy 75% of the space of the packs.

The quality of Paraguayan cigarettes is also much lower than that of Brazil, according to research carried out by the State University of Ponta Grossa, which showed that these products contain, in addition to high concentrations of heavy metals, animal waste such as cockroach legs and rat hair.

The issue of cigarette smuggling, in fact, is turning into a national security issue. It is nothing new for anyone that this activity is dominated by organizations such as PG. But in a testimony to the US Senate in May 2017,0 political scientist Ema-nuele Ottolenghi, of the Foundation for the Defense of Democracy (FDD), revealed the close link between the illegal cigarette trade and international terrorism .

According to Ottolenghi, the growing presence of companies affiliated with Hezbollah in the tobacco retail business increases the possibility that the illicit tobacco trade will become an additional source of income for the terrorist organization ”.

He further explained to US senators that drug and cigarette smuggling routes along the Paraguay-Brazil border are becoming indistinguishable. The current situation in public security in Rio de Janeiro is one. reminder of how organized crime works. How many rifles, pistols and machine guns have been produced in the capital of Rio de Janeiro in recent years? How many drug production centers have been blown up by the authorities? Illegal trade in products is one of the activities that causes the most damage to the population and the country. The difficulties in border inspection and control reinforce the need for greater integration between the various government forces involved in combating the problem. This is a premise for the country to return to growth, to generate jobs and to promote the development that we need so much. We can no longer live with illegality as if it were a normal part of our lives. It is necessary for the whole society to come together around a common objective: the restoration of the country we want, respecting ethics and the law, today and for the generations yet to come.

The impact of smuggling on the reality of Brazilians

Edson Vismona

A supportive unpublished research commissioned by the Brazilian Institute of Competitive Ethics (ETCO) for Datafolha brings surprising data. The survey carried out with more than 900 people from the south-east of the country shows that the majority of respondents (75%) believe that the entry of smuggled products in the country favors the growth of violence and crime. And even more alarming: even in the face of this information, most respondents recognize that they will continue to buy illegal goods.

But what makes the smuggled product so attractive? Another question asked in the research can elucidate this question: the high taxes practiced in Brazil. For 86% of respondents, the increase in taxes on Brazilian products favors the entry of contraband products. This is because, due to taxation, the national product generally costs more. It is the question of price.

Take for example the most smuggled product to Brazil, cigarettes, where the tax burden can exceed 80%. It is not difficult to conclude why, currently, 30% of the Brazilian market is dominated by smuggled brands, generating, in 2015 alone, tax evasion of R $ 4,9 billion to public coffers.

Currently, 19% of the Espírito Santo cigarette market is dominated by illegal brands. Between 2012 and 2015, the contraband cigarette market jumped 6% in the state, while the formal market suffered an equal contraction. While brands like Gifty and Bill are sold for an average price of R $ 3,77 - below the minimum price of R $ 5,00 established by law - the state accounts for losses of R $ 75 million, just due to tax evasion between 2012 and 2015. Therefore, they lose the government and the population and the criminals, who are extremely successful in their business, carried out on the margins of any Law, win.

It is certain that a tax measure would be of great help and could have significant effects. In the case of cigarettes, specifically, such a measure should seek a balance that would allow the effectiveness of tax adjustments in terms of reducing consumption, without, however, causing the migration of consumers from the legal to the illegal market, as recommended by the WHO itself.

In addition to the tax issue, the fragility of the borders also needs to be combated, as it represents one of the main opportunities to face this crime. Specifically in relation to this point, the federal government has already been sensitized and determined the creation of a working group formed by several ministries related to the subject. A recent report by the Federal Court of Accounts (TCU) pointed out several opportunities for efficiency and, mainly, governance for the resolution of the border problem, which is of public interest and national sovereignty.

In the fight against smuggling, however, it is necessary that the authorities, both at the federal and state levels, understand what society has already understood: tax increases are no longer tolerable and the government has a fundamental role in establishing an environment legality and fair competition in the Brazilian domestic market.

vismona_menor-still
Edson Vismona is executive chairman of ETCO - Brazilian Institute of Competition Ethics

Article published in the newspaper A Tribuna (ES) on 14/10/2016

Edson Vismona is the new CEO of ETCO

photo-edson-06_10_2014_ok-3Edson Luiz Vismona takes over from October, the Executive Presidency of the Brazilian Institute of Ethics in Competition (ETCO), replacing Evandro Guimarães.

Vismona is a lawyer, specialized in commercial defense and consumer law. He was Secretary of Justice and Defense of Citizenship of the State of São Paulo .; National Secretary for Agrarian Reform   Founder and President of the Brazilian Association of Ombudsmen / Ombudsman - ABO, he is a member of the National Council to Combat Piracy (CNCP), of the Piracy Combat Commission of the OAB / SP - Brazilian Bar Association, São Paulo section and of the Council of Ethics of the Instituto Ética-Saúde.

Ahead of FNCP since 2009, Vismona has been coordinating several initiatives to defend the legal market in partnership with ETCO.

The new ETCO Chief Executive believes that competitive ethics must be one of the foundations of Brazil's economic development, as it strengthens society's principles and values ​​and increases legal security, contributing to the construction of a more just and dignified country .