“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.

Legal certainty against state discretion

The lawyer and professor Roberto Quiroga, from the University of São Paulo and from the FGV Law School of São Paulo, dealt with the legal uncertainty in the interpretation of the tax rule. “Today, we have a tax dispute that has already reached R $ 3,3 trillion: half of a Brazilian GDP. So, two ways: either the taxpayer is misinterpreting the legal norm or the State is exaggerating the application of the legal norm ”, he said.

Quiroga recalled that the relationship of forces between the State, which has the prerogative of self-protection, and taxpayers is uneven. “We are not talking about a private relationship between A and B where I have to seek the State of Judge to resolve a conflict. The State launches the tax, the State has the right to self-protection, ”he said.

He criticized the instrument for modulating the effects of decisions of the higher courts, whose purpose of promoting legal certainty was being submitted to the convenience of public accounts. "It is the institute that I least believe in, because decisions can be made by nose," he said. “If modulation is an idea to provide security, it also gives insecurity. It creates such a condition that I don't know what the interpretation I am going to give and when it will be valid. Whether for the future, the past or the present. ”

Quiroga defended the so-called “guarantor” of the Brazilian Constitution. “Of course, we have to look at the state side. But the legal security we are talking about is the security that the constitutional text gives to the taxpayer. Against agency, against state authority ”, he justified.

Ten different votes from the STF

The tax attorney also criticized the lack of conceptual basis for decisions made by the different judging bodies, including the CARF (Administrative Council for Tax Appeals) and the Supreme Federal Court, mentioning issues in which there is great confusion in the jurisprudence. He cited, as an example, the taxation of profits abroad, appreciated by the plenary of the STF. “He decided nothing. He just confused everyone, ”he said. “Ten different votes. Today, I don't know how to tell my client how to tax profits abroad. ”

After the lecture, Quiroga answered the question from the seminar coordinator, tax attorney Everardo Maciel, about the consultation services offered by the tax authorities to taxpayers. He criticized the lack of preparation of the professionals who carry out this work and the risk of acting in part due to the fact that they work within the collection agency. “If I have a predetermined consultant to say no, the institute is worthless. Perhaps there should be a competition for consultants ”, he suggested as a means of making consultations more effective and impartial.

"Understandable, stable and predictable right"

Full professor of Tax Law at the University of São Paulo Humberto Ávila is one of the greatest Brazilian scholars on the subject of tax security. With an academic trajectory that includes doctorate and postdoctoral studies in Germany and postdoctoral studies at Harvard, in the United States, he is the author of the book Theory of Legal Security, with 744 pages, a “true treatise on the subject”, in the words of the chairman of the ETCO Advisory Board, Everardo Maciel.

In a lecture at the Taxation and Legal Security seminar, Ávila addressed three aspects that she considers essential for tax legal security. "There is security only when the law is understandable, stable and predictable," he said, attributing these factors to the relationship with time.

Understanding concerns the present: "The right to be followed must be at least well understood".

Stability, with the passage from the past to the present. “The taxpayer who trusts the law yesterday cannot be betrayed by the law today. For this reason, the right protects the acquired right, the perfect legal act, the res judicata, the protection of trust, the consolidated situations, the preclusions, prescriptions and decadences ”, he exemplified.

Predictability refers to the transition from the present to the future. "The taxpayer, when he acts, needs to minimally predict what are the consequences that will fall in the future on the acts he practices in the present," he said.

Didacticism of the courts

Then, he pointed out the main problems that exist today in Brazil in these three dimensions. He criticized the practice, common in the country, of not looking for the precise meaning of words and thus allowing for very elastic possibilities of interpretation. "There is no country in the world that is developed and in which words have no meaning," he warned.

Citing a recent decision by the United States Supreme Court, which instructed the courts of that country to declare laws that were badly formulated by Congress instead of trying to correct them, argued that a large part of the problems of legal insecurity seen in Brazil today are due to the lack of determination of the Judiciary to demand more quality in Legislative decisions.

“Do you know why in Brazil the legislation is bad? Because the Federal Supreme Court does not declare the laws unconstitutional because they are bad, ”he said. “We have to recover the didactic role of the courts and start declaring the unconstitutionality of rules that are contradictory, that are too vague, too ambiguous. Because the taxpayer has to guide himself or his behavior based on some direction. ”

Ávila condemned the practice of federated entities of instituting or increasing taxes through regulations, not laws, as required by the Constitution. He also criticized changes in orientation in jurisprudence that produce retroactive effects, violating taxpayers' rights.

At the end of the lecture, in conversation with Everardo Maciel, he drew attention to the risk that the country is taking with the institution of modulating the effects of judicial decisions to protect the state's finances. According to Ávila, this instrument encourages the State to disregard the Constitution, which ends up benefiting financially from unconstitutional laws. “The right has many effects, one of which is to define what is right and what is wrong. Now, if right is equal to wrong, I wonder what kind of citizenship there will be in Brazil and what kind of exercise of public power there will be in Brazil ”, he pondered.