The challenges of taxing the digital economy

The lawyer, professor of law and president of the Brazilian Association of Financial Law (ABDF), Gustavo Brigagão, spoke about the past and future of taxation. He outlined a brief historical overview of the choices made by Brazil in tax matters and the reflexes they produced in terms of legal uncertainty. He then addressed the new challenges facing the world in the field of taxation.

"Our tax system dates back to 1965, when the world was completely different," he recalled. “The goods were tangible goods that circulated between industry, wholesale and retail, until they reached consumption. The service was the result of human activity, necessarily. ”

At that time, according to him, while most countries were moving towards a national value-added tax, Brazil chose to create separate taxes for each federative entity - IPI, federal; ICM, then ICMS, for states; and the ISS, municipal. In Brigagão's assessment, this choice created many of the legal problems that would arise in the following decades, as the economy became more complex and the federal units began to dispute the right to tax the new activities that came into existence.

He cited several conflicts and their coming and going through the courts, such as the distinction between goods and services, the characterization of the place where the services are provided and the definition of inputs. Then, he presented a long list of new challenges that countries are facing due to the globalization and technological revolution of the last decades. “These new technologies have made the tax system, not only the Brazilian one, but the international tax system, chaotic”, he commented.

According to him, innovations such as e-commerce, cloud computing, internet of things, 3D printing, software subscription, streaming services, rental of properties by application, sale of consumer data, digital advertising and cryptocurrency have brought a series of tax challenges that still do not find satisfactory answers anywhere in the world. “Today, the merchandise can be sold via email. And printing is done at the consumer's home. In other words, the chain that existed for the circulation of goods becomes a chain of values, ”he said.

International initiatives

To scale the size of these businesses, he recalled that the five technology giants that make up the acronym GAFAM (Google, Amazon, Facebook, Apple and Microsoft) had a turnover of US $ 767 billion in 2017. “This is equivalent to the GDP of Switzerland”, he compared.

Brigagão highlighted three specific characteristics of these businesses that impose great difficulty on their taxation: not needing a physical presence in the country where the service is provided; have most of its value concentrated in intangible assets; and generate revenue from the user himself. “Providing data from these participants creates value that makes these companies worth billions. Whether through the use they make of this data, or through advertising, the level of audience that the marketing of these companies can reach ”, he explained.

He gave an account of the initiatives being studied or proposed by organizations such as the OECD, the G20 and the European Council and others recently adopted by countries like France, Spain and the United Kingdom to tax these new businesses. But he stressed that they still do not point in a clear direction on the best way to tax these companies.

Brigagão also spoke about the difficulties that global companies have in understanding the Brazilian system and made an assessment of the tax reform proposals under discussion in the country today. He defended the adoption of VAT to solve some of the main problems of the current model, such as yours complexity and cumulativeness, and recalled that it is adopted by 165 of the 193 countries in the world. But he considered the way it is proposed in PEC 45 to be inadequate and possibly unconstitutional.

Investor understanding

At the end of the lecture, tax attorney Everardo Maciel, coordinator of the seminar, reinforced the points brought by Brigagão about the challenges that countries face to tax the technology giants. However, he presented a point of view contrary to the adoption of VAT, considering it a tribute from the past, while recognizing the problems of the current system. "We are discussing the 1949 solution for the XNUMXst century," he noted.

Brigagão agreed with the obsolescence of VAT, but reinforced his criticism of the cumulative nature of national taxation and returned to defend its adoption to solve problems that affect the development of Brazil. ”I would very much like to be able to tell foreign investors that we have a form of taxation that is compatible with what they know. And today I can't say that ”, he lamented.

Taxation and Legal Security Seminar discusses ways to improve the Brazilian tax system

Promoted by the Brazilian Institute of Competitive Ethics (ETCO), the event brought together some of the leading jurists to strengthen discussions and raise the inevitable proposals for the country's current moment


Edson Vismona (Executive President of ETCO)

In the midst of discussions on Tax reform, the Brazilian Institute of Competition Ethics (ETCO) held on the 25th, in São Paulo, the seminar Taxation and Legal Security. Bringing together some of the country's leading lawyers, the event aimed to strengthen discussions and raise the inevitable proposals for Brazil's current moment. “Taxation is today one of the major problems we face in attracting investments and generating jobs. For this reason, it is our obligation to debate the topic and suggest ways that can improve the system ”, said Edson Vismona, president of ETCO.

The seminar addressed the interpretation of the Tax Rule, the tax process, reform and taxation of the XNUMXst century. All presentations were mediated by Everardo Maciel, president of the ETCO Advisory Council and former secretary of the Federal Revenue, who reinforced the importance of the event. “This initiative brings up what I consider to be the most relevant topic for determining investments in Brazil, which is precisely legal security. It is necessary to have a clearer definition, not only for the taxpayer, but, above all, for the investor of the concepts that integrate and constitute Brazilian tax law ”, he highlighted.

From left to right: Dr. Heleno Torres (Holder of Financial Law at USP), Dr. Roberto Quiroga (Professor of Tax Law at USP) and Dr. Humberto Ávila (Holder of Tax Law at USP and UFRGS)



First speaker of the day, Heleno Torres, Full Professor of Financial Law at USP, drew attention to the importance of tax reform. “There will be no recovery of the economy just with the pension reform. It is essential to have a tax reform that comes to guarantee the predictability of taxes levied on commercial operations and that reduces the complexity of our system ”, he said.

Dr. Hamilton Dias de Souza, Master and Specialist in Tax Law at USP

Heleno's opinion was shared by Roberto Quiroga. During his lecture, the lawyer, who is a professor of Tax Law at USP and the Professional Master's Degree at Fundação Getúlio Vargas (FGV), highlighted the need for further clarification regarding the functioning of the Brazilian tax system for companies and the population. "It is essential that everyone participate in the discussions that hinder tax reform, especially with regard to the rules that may undergo some type of change."

Hamilton Dias de Souza, a master and specialist in Tax Law at USP, explained that Brazil has a chaotic and harmful tax system for the business environment, which impacts on investments in the country and job creation. The lawyer was emphatic in defending the reform, but with some reservations. “Should the reform be absolute and total? Disruptive? A reform that, instead of taking advantage of what works well, creates entirely new legal forms? I do not think so. I am in favor of a specific tax reform that takes advantage of some of the positive points that we have today ”, he said.

Development of legal certainty and XNUMXst century taxation

Humberto Ávila, national and international reference in legal security, reinforced the concept of the theme. “Legal certainty is the principle of principles. It is she who instrumentalizes the validity and effectiveness of all the others ”, he explained. For the Titular Professor of Tax Law at the University of São Paulo (USP) and at UFRGS (Federal University of Rio Grande do Sul), what happens in Brazil today is a lack of understanding by the Judiciary about its function. "In many cases, he is concerned with issues that are not fundamental," he said.


Dr. Gustavo Brigagão, president of the Brazilian Association of Financial Law (ABDF)

Gustavo Brigagão, president of the Brazilian Association of Financial Law (ABDF), brought the scenario of legal security and taxation in the XNUMXst century“New technologies revolutionize the way we live and negotiate. To discuss the future, it is necessary to be aware of the mistakes of the past in relation to everything that concerns our tax system so that, thus, they will not be committed again ”, he said.


The seminar Taxation and Legal Security was held at the Renaissance hotel in São Paulo. The event, conceived by the Brazilian Institute of Competition Ethics (ETCO), it had the support of the Brazilian Association of Financial Law (ABDF), the Association of Federal Judges of Brazil (AJUFE) and the Center for the Study of Law Firms (CESA).


ETCO holds the Taxation and Legal Security seminar – Registration closed

Invitation banner for the seminar held on 25/6/2019

A research conducted in 2019 by consultancy EY, at the request of ETCO, showed that the stock of tax litigation by the federal government alone is already equivalent to more than half of GDP.

On June 25, 2019, ETCO held in São Paulo the Seminar on Taxation and Legal Security, which brought together leading jurists to discuss solutions to problems in the Brazilian tax system.

House approves project that allows outsourcing of the company's core activity

Deputies approved an amendment that allows outsourcing to any sector of a private company. Photo: Luis Macedo / Chamber of Deputies
Deputies approved an amendment that allows outsourcing to any sector of a private company. Photo: Luis Macedo / Chamber of Deputies

The Chamber of Deputies concluded on Wednesday (22) the vote on the bill for outsourcing (PL 4330/04). An amendment was approved in Plenary that allows the outsourcing of core activities of companies in the private sector to be outsourced and that changed several points of the basic text of the proposal. The text will go to the Senate.

The amendment, authored by PMDB and Solidariedade, was approved by 230 votes to 203. The text does not use the terms activity-end or activity-means, but allows outsourcing of any sector of a company.

Signed by the project's rapporteur, deputy Arthur Oliveira Maia (SD-BA), and by the PMDB leader, deputy Leonardo Picciani (RJ), the amendment also expanded the types of companies that can act as outsourced workers, opening up the offer to associations, foundations and individual companies (of one person). The individual rural producer and the liberal professional may appear as a contractor.

Another change in relation to the base text is the reduction, from 24 to 12 months, of the quarantine period that former employees of the contractor must comply with in order to be able to sign a contract with them if they are owners or partners of an outsourcing company. Retirees will not be required to meet deadlines. Quarantine seeks to avoid hiring former employees through individual companies.

Subcontracting by the contractor (“quarteirização”) can only occur when it comes to specialized technical services.


Jobs or insecurity
The PDT leader, Deputy André Figueiredo (CE), criticized the proposal. “They want to transform workers in PJ [legal entity]. The original project spoke in 24 months and is now in 12. It will make it easier to circumvent the legitimate outsourcing project, ”he said.

For the rapporteur, Arthur Oliveira Maia, the project was debated for a long time. He stressed that the differentiation between activity-environment and activity-end was created by the Superior Labor Court (TST). "This differentiation only exists in Brazil and was not created by this House, which has the function of legislating", he criticized.

The outsourcing of the core activity is condemned by the union leaders with the argument that it will weaken the workers' organization and, consequently, their negotiation strength with the companies. Entrepreneurs, on the other hand, argue that this contracting system will bring more agility and cost reduction for the contractor, with effects on the economy.

outsourcing infographics

To access the full proposal: 4330 PL / 2004

Source: Agência Câmara de Notícias (22/04)

Multilevel marketing: commission can vote on a report that regulates activity

The special commission that analyzes the regulation of multilevel marketing (PL 6667/13) can vote this Tuesday (9), at 14:30 pm, on the report prepared by deputy Lourival Mendes (PTdoB-MA) on the subject.

Multilevel marketing is a commercial model for distributing goods or services in which gains can come from selling products or recruiting new salespeople. That is, the reseller who appoints other resellers also earns a percentage on top of those sales.

Source: EBC Portal (9/12)

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