Six views on tax reform

Gather different views on the problems of the current tax system and the changes needed to fix or replace it. This was the objective of the Taxation in Brazil seminar, held in partnership with ETCO and the Valor Econômico newspaper in July, in São Paulo. The event had contributions from important names on the national scene.

Tax consultant Everardo Maciel, former secretary of the Federal Revenue and chairman of the ETCO Advisory Council, spoke about taxing the future - and criticized some of the main reform proposals under discussion today in the country.

The assistant attorney general of the National Treasury, Phelippe Toledo Pires de Oliveira, spoke about the inherent complexity of the entire tax system and the excesses of the Brazilian model.

Professor Roberto Quiroga showed a preference for not so drastic changes in the current system and defended measures to reduce tax litigation.

The economist Marcos Lisboa dealt with the relationship between the tax system and the country's development, defended the adoption of some principles for the reform and recommended more attention to international studies to support new proposals.

The federal deputy Efraim Filho, a member of the Special Tax Reform Commission, was responsible for the closure, which showed optimism about the progress of the reform this year in Congress.

Below, we publish a selection of the views they presented at the ETCO and Valor event. Click on the images to read the highlights of each speaker:

"I have the impression that I am on another planet"

Few Brazilians understand tax systems as much as Pernambuco's Everardo Maciel, president of the ETCO Advisory Council. He has followed the theme since the 1960s and accumulates deep academic knowledge with a relevant career in the public sector, which includes eight years as secretary of the Federal Revenue in the FHC governments (1995-2002).

In his lecture at the Taxation Seminar in Brazil, Everardo made strong criticisms of the reform proposals being debated today in Brazil. He stated that they do not deal with either the great contemporary issues of the tax field discussed worldwide or the real problems of the Brazilian system, on which he made an overview.

He also dismantled some clichés about the Brazilian tax model, which he called “mystifications” of those who do not study the topic in depth, and pointed out what he considers to be major mistakes in the main tax reform project under discussion in the Chamber of Deputies, PEC 45 / 2019. Following are excerpts from the lecture:

What the world discusses

“Sometimes, when I look at the discussions taking place in Brazil about tax matters, I have the impression that I am on another planet. Because that is not what is being discussed in the world. We have at least three major tax issues that are being discussed outside of here: first, the erosion of tax bases; second, the taxation of the digital economy; third, a problem to which we still have no answer, which is that of new sources of Social Security financing. ”

Erosion of tax bases

“Tax bases are eroded for a combination of reasons, but notably abusive tax planning, tax havens and the transfer of taxation of profits from countries with higher taxation to countries with lower taxation or without taxation, which are, after all, tax havens. ”

Taxation of the digital economy

“When we talk about taxing consumption we have always been looking at issues such as the provision of services and the sale of goods. Now, we have another phenomenon, poorly known, badly sized, but perhaps the most relevant of all: how to tax information? When you go to Google, which historian Yuval Harari calls ´the attention merchants´, the product is you. We are, therefore, dealing with a phenomenon completely unlike anything known. The information he captures by apparently giving away free information has become, perhaps, the greatest source of contemporary wealth generation. To this end, the European Union approved at the end of last year a turnover tax, a tax on the billing of large companies that convey information and that are in the digital economy. A cumulative tax, which will start to dismantle some theories about cumulative and non-cumulative. ”

New sources for Social Security

"The world changed. The nature of employment has changed. It is a revolutionary change. There are discussions about taxing financial transactions. France and Germany objectively discuss this, which is perhaps one of the only possibilities for creating a new source of Social Security funding. A person as qualified as the Nobel Prize in Economics Robert Shiller is considering taxing robots, in which he is supported by Bill Gates. ”

Clichés and mystifications in Brazil

“Taxation, as it is somewhat unpleasant, gives a remarkable space for mystification, for hasty conclusions about things that have not been studied seriously. The first is the complexity of the tax system. Complexity is inherent in phenomena. What cannot be distinguished is complexity of operability. Tax systems must be operable. They have to be easy. And not necessarily simple, because simplicity or complexity are inherent to the phenomenon. ”

Fantasy about regressivity

“There is a fantasy that, if I tax consumption more, I am in a regressive system. This is just fantasy. It depends on the form of taxation of consumption, it depends on the form of taxation of income. ”

Competition and fiscal war

“There is an inability to distinguish licit tax competition from illicit tax competition, which is the fiscal war. Tax competition has existed since there are taxes. Tax competition here cannot, in Europe it can. If I speak English it is reasonable, if I speak Portuguese it is bad. Tax ruling can, tax incentive cannot. ”

Our biggest problems

LITIGATION: “Litigation has to do with the tax process, not with the tax. It can be any tax, if the process is dysfunctional, there will be excessive litigation. ”

LEGAL INSECURITY: “Which is associated with concepts with low normative or controversial density. But this has to be resolved by the normative way, it does not depend on taxes. ”

BUROCRATISMO: “Bureaucratism refers to accessory obligations, it does not depend on the nature of the tax. The Brazilian tax system is very bureaucratic not because it has ICMS, PIS, Income Tax, nothing like that. It is bureaucratic because it has excessive ancillary obligations. And the domain of ancillary obligations is a separate domain from substantive law. ”

Border between ICMS and ISS

“The biggest problem that exists is the border between ICMS and ISS. How to do this is a challenge to intelligence. The simple solution says: ´the two come together´. Well, but what about the federative issue? How is all the jurisprudence that exists around this? Is it to throw the dirty water in the basin with the child? ”

PEC 45: design errors

“PEC 45 is a magical solution to solve problems, centered, among others, on the principle of destiny. Fate principle is a tax evasion matrix. He wants to institute an IVA, which is an obsolete tax, from 1949, absolutely unable to deal with the digital economy in a world that is thinking about something after taxation of consumption and income. It is stated that, with the adoption of this model, the Brazilian GDP will grow ten percentage points. This is shame, it is bad magic, it has no connection. ”

PEC 45: who wins and loses

“In essence, it is a transfer of taxation. Who wins with that? Financial institutions, large companies in the industrial and commercial fields. But if the aggregate tax burden is constant, someone pays that bill: the 850 taxpayers who are in the presumed profit, who are essentially small service providers, traders and industrialists. The civil construction sector also pays this bill. ”

Service price increase

“The price of medical appointments will rise, school fees will rise, the health plan will rise, which is the only way to balance the new account. PEC 45 increases taxation in these sectors by between 300% and 700%. ”

PEC 45: other problems

SELECTIVITY: “It says that for VAT taxation everything will be the same, so the bread has the same rate as the fur coat. And, to correct this injustice, the poorest are given a 'tax scholarship'. It definitely doesn't work. ”

FISCAL EVASION: “VAT has serious problems with tax evasion, one of which is called ´carousel´, the illicit sale of services to transfer credit. Another: I'm going to see the doctor, he says' my dear, now the rate is 25% ´. What will happen next? 'Is it with a note or without a note?' ”

INCREASED LITIGIOSITY: “More than 150 articles of the constitutional text and the Transitional Constitutional Provisions Act are dealt with, with forty new concepts. This gives litigation for eternity. ”

CONFLICTS BY SHARING: “PEC says that a singular rate in a complementary law will define the sharing and binding of taxes. This is a deadly war between federal entities and between sectors. ”

FIFTY-YEAR TERM: “For fifty years there would be compensation for losses between the federal entities. Does anyone in their right mind believe that there will still be taxes in fifty years - at least as we know them today? ”

INCREASED COMPLEXITY: “For ten years, the taxes that exist today will coexist with the new taxes. That is to say: none of the problems that exist today are solved and new ones are created. ”

“We are going to work around the swamp”

The Brazilian tax system needs changes that value good taxpayers, fight the persistent tax debtors and correct specific problems in sectors that suffer unfair taxation competition, such as cigarettes, beverages and fuels. These were the main points defended by ETCO's executive president, Edson Vismona, at the Taxation in Brazil seminar.

He also recalled ETCO's participation in the approval and implementation of important projects to combat tax evasion in the country. He cited the implementation of physical control systems for the production of beverages and cigarettes, the approval of article 146-A of the Constitution, which authorized treating in a tougher way taxpayers who use illicit tax advantages against their competitors, and the creation of the Underground Economy Index, which has followed the evolution of the informal economy in Brazil since 2003.

Vismona also recalled the two manifestos that ETCO prepared, with proposals on taxation and public security, and which he personally delivered to the main candidates in the 2018 presidential elections.

The following are some proposals that he defended in his lecture:

Bypass the swamp

“In discussions at the ETCO tax group, I remembered the guidance that Abraham Lincoln gave his generals in the American Civil War: 'Gentlemen, if you come across a swamp, don't go in there, turn around'. When I hear the current debates on tax reform, that image comes to me. This can be a swamp, we are going to work around the swamp, because, when we get into this idea of ​​reform, everyone thinks: 'it will reduce the tax burden'. But without reforming the state? ”

“Nobody wants to lose. The State does not want to lose, the Union does not want to lose, the Municipality does not want to lose, we do not want to lose, companies, sectors. Then you walk to a game of ´lose you, I don´t´. That is, each one has a tax reform in mind. Against this background, the idea of ​​the swamp becomes increasingly clear. ”

Tax authorities

“We taxpayers want to keep up with our contributions to the tax authorities and we find all the difficulties. We are the country that spends the most time to fulfill tax obligations. We work for the state. And the State is looking: "Wrong, take a fine, 150% fine and I will take you to Criminal Justice". And then there was this maxim of the correct taxpayers: "I shouldn't, I deny it, but I pay". One of our associates, faced with the threat of taking a criminal report, paid, went to court and, after a few years, won. Look at the burden of this: you paid something you shouldn't have! And he had to go to court to argue. ”

What ETCO stands for

“We have proposals: a program to reduce bureaucracy. There is already a complementary bill, it was discussed in our tax group, with an emphasis on a single tax register, in the simplification of the processes of opening and closing companies, this is now happening with the MP for Economic Freedom; elimination of the requirement for a negative certificate; universal tax compensation; annual consolidation of legislation; and setting a deadline for responses, because the tax administration has no deadline, we do. ”

“Some PLs that we are suggesting: a radical reform of the tax process, there are already two PECs that are being discussed. Establishment of general tax procedural rules, with integration between administrative and judicial proceedings. Restructuring of tax administrative litigation bodies. Monophasia of the ICMS on fuel, as provided for in the Constitution. ”

Stop cigarette smuggling

“Our market is being delivered to the smuggler. Today, 54% of it is in the hands of smuggling. There has been a disproportionate increase in the past four years. Last year, the collection was lower than the tax evasion. Why is that? In Paraguay, the tax on cigarettes is 18%, in Brazil, 70% to 90%. The price difference is half. The low-income class only buys contraband products. Organized crime has already occupied this space. He finances himself with these billions that are evaded. We have to crack down on criminal organizations, but we need to look at the demand. The police say this: it is no use, just because of the repression, we will not change this situation. Our proposal is to maintain the tax burden, but to change the distribution of taxes: the premium brand tax is increased and each company creates a confrontation mark with a lower tax to occupy the smuggling space. It is the only proposal that we believe is feasible at the moment. And we want to move forward with it, because otherwise the projections already show that, next year, the market will already be 60% in the hands of smugglers, with an upward bias. ”

Fighting hard debtors

“The regular tax debtor structures the business so as not to pay tax, he makes money by not paying tax, he erodes competition by not paying tax, he seeks to discuss in all administrative and judicial instances, in all ways. And he conveys the image that he is a victim, he wants to be confused with an eventual tax debtor. He uses this maxim: 'I must, I do not deny and I do not pay'. When the tax authorities finally reach it, the company no longer exists, it has already closed, it is something that will simply get lost. There are billions of reais in the beverage, tobacco and fuel sectors. Our proposal is PLS 284/2017 which is being processed in the Senate. It is the other side of the coin: for the average debtor, we want the tax authorities to have effective collection mechanisms and to be able to use these mechanisms to prevent liabilities from growing in an absolutely unsustainable way. ”

Physical control of drinks

“The physical control of beverages was suspended by the IRS. There was gross corruption in the operation and the government decided to throw the child in with the bath water. Instead of maintaining, perfecting and ending corruption, they preferred to shut down the system, and that already has perverse effects on competition in the beverage industry. ”

"We need to simplify our tax system"

The ideal tax reform must guarantee some assumptions: be economically sustainable; reassess the distribution of taxes between consumption, income and wealth; reduce the complexity and litigation level of the current system; respect the federative pact; review tax benefits; reform the tax collection process; and fight the stubborn tax debtor. These were the topics addressed by the Deputy Attorney General of the National Treasury, Phelippe Toledo Pires de Oliveira, at the Taxation in Brazil seminar, held in partnership by ETCO and the newspaper Valor Econômico. Following, a selection of excerpts from the lecture.

Optimal level of taxation

"Adequate taxation cannot be too low to not compromise the sustainability of the State in the provision of services, nor so high that it stifles the economy, kills the goose that lays the golden eggs."

Collection sources

“As taxable wealth, we traditionally have assets, income and consumption. From the Brazilian point of view, in income taxation, we have the IRPJ, the IRPF and the Social Contribution on Profit; on equity, IPTU, IPVA, ITBI and ITCMD; consumption, IPI, ICMS, PIS and Cofins. Today taxation in Brazil is based on consumption (48% of revenue) and payroll (26% of payroll and just under 20% of income tax). Taxation on equity in Brazil is less than 5%. ”

Why is it so complex

“Complexity is inherent in our tax system. It is complex because there are different tax types - taxes, fees, improvement contributions, compulsory loans - and within each of these species there are also the taxes themselves: Income Tax, Contribution for Intervention in the Economic Domain, contribution on the payroll . We have countless tributes. And countless taxes collected and imposed by different entities. So complexity is inherent in the system. ”

We need to simplify

“There are a multitude of taxation regimes, collection regimes, single-phase system, forward replacement, backward replacement, income tax withheld at source… So our legislation is a daily challenge. And complex legislation, combined with other economic factors, gives rise to enormous litigation. ”

High level of litigation

“We have about 6 million tax foreclosures within the Union alone. Today, in CARF alone, there are around 150 thousand cases in process and approximately 12 thousand to 14 thousand trials per year. Just to put an end to the tax liability today at CARF, considering that no more lawsuits would enter, it would take ten years. ”

“Legal discussions sometimes take twenty years. We need to try to reduce this dispute. A reformulation of the collection system is necessary. Tax enforcement is sometimes there for years, creating an incentive for the bad debtor. ”

Exemption from dividends

“The dividend exemption brought a great benefit, which was to end the discussion about the disguised distribution of profits. But it also spawned the phenomenon of ‘wronging’ to pay less taxes. ”

Reassess tax benefits

“The issue of tax benefits exists worldwide, but are the tax benefits here in Brazil fulfilling their purpose? To what extent would the reduction of these benefits not allow a consequent reduction in the corporate income tax rate? Just as we are seeing a discussion about the end of privileges for public servants and the end of privileges for deputies in relation to the social security benefit, it is necessary to rethink in relation to the tax, in relation to the return of this benefit to society. ”

Fight against the debtor

“Most of the time, they are companies that have nothing in their names. So the problem is timing in relation to the time of inspection and the time of collection, which the regular debtor will discuss administratively and judicially, postponing the payment until after ten years, when there will be no more equity. With this project to combat the persistent debtor [PLS 284/2017, pending in the Senate], in some very specific situations it is possible to cancel even the CNPJ registration, so that, immediately, it cannot continue to work. ”

"It's good to check what the data says"

In his lecture at the Taxation in Brazil seminar, economist Marcos Lisboa criticized the current tax system and some proposals that are being suggested for tax reform. It is worth remembering that he accumulates relevant trajectories in the academic environment (Ph.D. in economics from the University of Pennsylvania, he was a professor at FGV and an assistant professor at Stanford University), in the government (he was secretary of Economic Policy at the Ministry of Finance in 2003 2005) and in the private sector (current president of Insper, was vice-president of Itaú and president of the Brazilian Reinsurance Institute).

Lisbon rejects, for example, the practice of stimulating companies, sectors or regions of the country through tax incentives, recommending the way of public spending. It condemns to vary the level of taxation according to the type of product so as not to distort relative prices. Disapproves the return of the tax on financial transactions. And he says that the high level of conflicts between the tax authorities and companies is preventing investments. The economist also spoke about taxing profit sharing, reducing corporate taxes and adopting VAT.

Following are excerpts from the lecture:

Spending instead of incentive

“Everything you do via tax incentives, you can do via public spending. There is no reason to encourage a sector, a production, a factory through tax incentives. It has no transparency, it does not pass through Assemblies or Congress and creates distortions between sectors. Do you want to give a benefit to a sector, to a company, do you bet on the project? Great. Taxation has to be the same for all sectors, so collect the funds and, via the Assembly or Congress, make an allocation to support project A, B or C. And that has transparency, has control of society. ”

Measure the right way

“There is vast international evidence in the applied literature with data that shows that public policy via spending is much more effective than via taxation. Now, you can't do the math as some areas do: "I received so much public subsidy and I generated so much employment". Accounting for public policy evaluation has to take into account the opportunity cost of the policy. By resolving to support the Manaus Free Trade Zone, we are failing to spend R $ 28 billion in another area. It is useless to say: ´The Free Zone generated X jobs´. I could have given you a lot more jobs otherwise. ”

Do not distort relative prices

“Taxation should not distort relative prices. Every time you distort relative price in relation to the effective cost of production you make the country poorer. If, for example, CPMF returns, the tax on financial transactions - and high, as it is proposed -, it is better, instead of buying from suppliers in some cases, to produce the parts internally, because I do not pay the tax, even that is less economically efficient. That is, tax distortions benefit the inefficient. ”

Misallocation of resources and poverty

“Taxation should not distort relative prices. This reduces the productivity of the economy, it leads to allocative inefficiency. When we analyze business census data between rich and poor countries, between 30% and 60% of the productivity gap comes from misallocation of resources. It is capital and labor employed in inefficient companies. This is one of the main factors why poor countries are poor. ”

The losses from the CPMF return

“An article just came out this year in the Journal of International Money and Finance, by researcher Felipe Restrepo, about countries in Latin America that have adopted taxes such as the CPMF and the impacts it has caused: increased demand for currency - of course, the less. make financial transactions, better, you pay less tax -, reduced credit supply, less industry growth. So much so that countries have been abandoning the CPMF. Australia, which is the only developed country I know of that used it, abandoned it a long time ago. There is only one country left that has a high CPMF rate, only one: Venezuela. ”

Sixty times greater tax litigation

“Our litigation, according to a study comparing the tax litigation of seventeen countries, carried out in 2014, only in the Federal Revenue and CARF, without taking into account the ICMS, is 12% of GDP. The index is sixty times the median value of seventeen countries. And this is having an impact on investment, private decisions. ”

“Our tax litigation is dysfunctional. The governance of the tax regime is not good. The IRS does the standard, interprets, assess, the auditors have a casting vote in CARF. Something is not working well given the size of the litigation, given the conflicts between revenue and taxpayers, given the country's backwardness. ”

Taxation at destination

“Good tax practice and good tax theory for better functioning of the economy is to tax at the destination where the goods are finally sold. Brazil has a tax on the origin and we know the consequences - the fiscal war is one of them. But it is worse than that, because it has consequences on the allocation of assets. You put the factory where it shouldn't be. That capital ends up going to a region where it is less productive. ”

Taxing individuals - and less legal entities

“In the world, the corporate income tax is being reduced. It's going to 19%, 20%. You tax the company much less and tax the distribution of results. What is the problem with Brazil not being in agreement with the world? Our companies are unable to go international. ”

“If I want to do tax justice, I have to tax personal income. If I confuse the individual with the size of the company, I commit immense injustices in society. ”

Pros and cons of VAT

“In VAT, which is the most common indirect tax in the world, you tax the income generated. Basically, it is a tax on wages, interest, rent, on the income generated, on what was created from wealth, which is what good taxation commands. You tax the creation of wealth, you do not tax what has not generated wealth. But the difficulty, we know, is to induce tax evasion. ”

Patching won't do any good

Federal deputy Efraim Filho (DEM-PB) is confident in the progress of tax reform in the National Congress. He bases his optimism on the leading role that the Chamber of Deputies has taken in relation to the pension reform, which he hopes to see repeated in the tax agenda, and in the maturing of the issue with society.

Efraim addressed the matter in the lecture that ended the seminar on Taxation in Brazil, promoted in partnership with ETCO and the newspaper Valor Econômico. In his assessment, the problems of the Brazilian tax system are already well diagnosed and it is necessary to “now go on to therapy”.

The deputy said he believes that the backbone of the reform will be PEC 45/2019, prepared by the Center for Tax Citizenship (CCIF), under the coordination of economist Bernard Appy and presented by deputy Baleia Rossi (PMDB-SP). He estimates that the report of the Special Tax Reform Commission, which is part of it, must be presented to the Chamber by the end of October.

Efraim recognizes that the topic is difficult, involves many interests and raises complex issues from an economic and legal point of view. But it advocates a profound change, rather than more specific and infraconstitutional changes. "Making a patch will not do any good, because a patch on rotten fabric tears," he compared.

The deputy also criticized the vision of privileging the State's tax collection interests, in discussions on tax rules and inspection, neglecting the private initiative. "The productive sector today is seen with a presumption of guilt," he said. "It needs to be valued." Efraim, who chairs the Mixed Parliamentary Front to Combat Smuggling and Counterfeiting, also spoke about the importance of the country facing the illegal market that reduces tax revenues, causes unfair competition and puts the population's health at risk.

Check out some excerpts from the lecture:

Protagonism of Congress

“The role that Congress assumed in the pension reform will also be reflected in the discussion of tax reform. President Rodrigo Maia, today a great believer in the stability of this country - within Congress, in the relationship between powers, in dialogue with foreign investors -, has called to Congress and to himself the responsibility to move forward in tax reform. ”

What reform proposal?

“As soon as President Rodrigo Maia takes responsibility and asks his main leaders to subscribe to Bernardo Appy's proposal, brought by Deputy Baleia Rossi, who heads the PMDB, it becomes the backbone of this debate . This is feeling, not information. ”

Think outside the box

“For me, we still see many things being thought, to use the very modern expression, 'inside the box'. You have to look from the outside, you have to try to conceive something new. Patching won't do any good, because a patch on rotten fabric tears. Patching rotten fabric will generate a new hole. It is necessary to have the concept of trying to make a proposal that is new possible. ”

Valuing the productive sector

“It is necessary to prioritize those who produce in Brazil. Whoever produces in Brazil can no longer be the villain of history. He needs to be seen as a hero. Hero of the resistance. The productive sector today is seen with a presumption of guilt. ”

“For some time now, Brazil has only been thinking about the rule to make life easier for the State. It's wrong. The rules today are to facilitate collection. They are not to make the taxpayer's life easier, nor for simplification, nor for him to be able to maintain his business without having to evade. ”

Fight against smuggling

“The cigarette sector, for example, how to admit that the illegal market occupies practically 60% of the market? You stop collecting taxes, you stop generating jobs, it's a lose-lose game. ”

“Smuggling, counterfeiting, piracy, the illegal market, everything is extremely harmful to society, and the worst thing is that our society, which is tolerant of small deviations, even feels sorry for the smuggler, because the first image that comes is that of the DVD, CD seller. ”

Relationship with organized crime

“When you break the superficial shell and go to the heart of the crime of smuggling, it is there who finances organized crime, drug trafficking, generates currency evasion, loss of revenue, deteriorates the formal labor market, creates health and integrity risks consumer. ”

Enough tax litigation

Tax reform discussions often focus on changes in the types of taxes and how to share the burden and distribute resources across society. But they usually leave aside an extremely relevant aspect for the development of the country: the legal security of the tax system.

Brazil is one of the world champions in conflicts between tax authorities and taxpayers. Experts estimate that, in all administrative and judicial instances in which these differences are discussed, the amounts involved already reach R $ 3,3 trillion, which represents about half of the country's GDP. And the trend is for growth.

To contribute to this discussion and the search for solutions to the problem, ETCO held in June, in São Paulo, the Taxation and Legal Security seminar. The event brought together great lawyers in the search for solutions to the problem.

Heleno Torres, professor at the Faculty of Law of the University of São Paulo (USP), spoke about the points that should guide the improvement of the Brazilian tax system, including the solution of conflicts in tax processes.

Roberto Quiroga, lawyer and professor at USP's law school and Fundação Getúlio Vargas of São Paulo (FGV Direito SP), gave a lecture on the interpretation of the legal standard.

Humberto Ávila, also a professor at USP, dealt with the principles of legal tax security and its relationship with economic development.

Hamilton Dias de Souza, lawyer and counselor at ETCO, presented a critical view of the tax reform proposal under discussion in the National Congress (PEC 45).

Gustavo Brigagão, professor of law and president of the Brazilian Association of Financial Law (ABDF), addressed the international tax challenges in the face of technological innovations of the XNUMXst century.

The seminar was coordinated by the president of the ETCO Advisory Council and former secretary of the Federal Revenue (FHC government), Everardo Maciel, who highlighted the importance of the theme: “It is the most relevant for the country in terms of investment, especially in the tax field . ”

At the opening, the Institute's executive president, Edson Vismona, drew attention to the two extremes of the problem: on the one hand, taxpayers who seek to do everything within the law, but suffer from the complexity of the system, the tax authorities' arbitrariness and constant changes in the norms or in their interpretations - and they often end up paying taxes that they should not while awaiting final decisions of Justice; and on the other hand, regular tax debtors, who do not pay due taxes, use the complexity and delay in decisions to make money illicitly. “The motto of the first is: 'I must not, I deny, but I pay'; the second is ´devo, I don´t deny it and I don´t pay´ ”, summarized Vismona.

In the links below, we present a summary of the main points addressed by each speaker. The full content, including video and transcript of the lectures, is available HERE and will also be converted into a book. The objective, as explained by the chairman of the ETCO Board of Directors, Victório De Marchi, at the end of the seminar, is “that these ideas, these suggestions, these proposals be taken to our legislators to see if we can get a tax system compatible with international needs ”.

The event was supported by ABDF, Ajufe (Association of Federal Judges of Brazil) and CESA (Center for the Study of Law Firms).

The videos of the lectures and their transcript can be accessed  HERE




“The tax authorities cannot collect even 1% of the active debt”

The head professor of the Department of Economic, Financial and Tax Law at the Faculty of Law of the University of São Paulo (USP), Heleno Torres, spoke in his lecture on the conflicts between taxpayers and the tax authorities, the administrative and judicial process and tax reform . He regretted that the projects under discussion are too focused on the creation of the value added tax, without paying due attention to issues related to legal certainty. In his opinion, Brazil needs a system that brings more predictability to economic activity, allowing “people to know exactly what are the taxes they must pay and what are the obligations they must fulfill in relation to the taxes that are due and, at the same time, at the same time, constitute a state of security, a state of normality, where the business environment can favor new investments and the breadth of business expansion in Brazil ”.

He argued that changing the current system respects five principles:

    1. Actual non-cumulative taxation, with a tax incidence that allows universal credits to be taken, that is, financial credits in all operations.
    2. Single rate throughout the circulation process.
    3. Reduction of exception regimes, such as tax substitution.
    4. Revision of the tax benefits model.
    5. Simplification of ancillary obligations.

Heleno Torres drew attention to the need to control excesses of the tax authorities. "The National Tax Code, for example, lacks a chapter on the inspection process and procedure, which gives taxpayers more candid rights over the limits of inspection and the action of the tax authorities in administrative relations," he said.

The tax attorney told the case of a client who, after being warned twice by the inspection that his business should be classified as a financial institution, decided to change his corporate name to fit into this category. During this process, he was surprised by CARF's decision against the change, claiming that the company did not meet the requirements of a financial institution. "The tax system cannot lead taxpayers to such a contradiction," he warned. “These contradictions aggravate the business environment, heavily aggravate taxpayers with the sum of fines, interest, charges, lawyers' payments and so many other repercussions and, in fact, this is not what is expected from a tax system with legal certainty. "

Reform consultation system

Heleno highlighted the urgency of a reform of the consultation system to make it effective in resolving taxpayers' doubts and reducing conflicts. “We need to reformulate the consultation system very urgently, to take advantage of this opportunity so that, from the moment of the presentation of the notice of infraction, or even the launch, there is the possibility for the taxpayer to start his challenge, so that this is speedy, to the extent where the market also needs quick tax decisions, ”he said.

He talked about the need for greater uniformity of understanding in the judgment of tax lawsuits, to avoid that equal cases have different results in different instances. And he recalled that the current situation is also of no interest to the State, which does not receive tax debts, nor to society. “There is not a single state, a single municipality in the country where the active debt has a collection higher than 1% of the accumulated volume. In other words, the conflict does not matter to the tax authorities, ”he said. “The tax that does not enter the public coffers spontaneously is missing from the public budget. And, when there is a lack of two in the public budget: either we have tax increases or we have contingencies until that revenue enters the public accounts and that budget can meet these expenses. Either way, society loses. ”

At the end of the lecture, in a brief conversation with tax attorney Everardo Maciel, the event's coordinator, he answered a question about the integration of the administrative and judicial stages of tax processes. "If this is to simplify, to reduce litigation, it is urgent that we simplify the processes in this universe so complex that it is the administrative and judicial litigation", he concluded.