New Goods and Services Tax will require new tax procedure rules in Brazil

FGV’s Sao Paulo Law School (Direito SP) has been discussing several modernization and de-bureaucratizing initiatives for the Brazilian tax system, with the aim of promoting greater rationality and competitiveness in the national industry.
法学
26 四月 2018
New Goods and Services Tax will require new tax procedure rules in Brazil

During the first semester of the year, the Nucleus for Fiscal Studies (NEF) of FGV’s Sao Paulo Law School (Direito SP) has been discussing several modernization and de-bureaucratizing initiatives for the Brazilian tax system, with the aim of promoting greater rationality and competitiveness in the national industry. On March 28 and April 11, the NEF invited several experts to discuss aspects of the proposal to implement the Basic Tax on Services (IBS).

The project, formulated in partnership with the Center for Fiscal Citizenship (C.CiF), basically proposes to replace the complex Brazilian tax system, tripartite between taxes such as ISS (municipality), ICMS (states) and IR, PIS/Cofins and others, collected by the federal government, with a single tax, with a tariff established by law, whose value would be divided among the federal entities.

According to Eurico de Santi, a professor at Direito SP, NEF Coordinator, and Director of the C.CiF, in addition to the single rate, the proposed implementation of the IBS would respect the federative principle (recognizing the competences of each federal entity to collect taxes) and the principle of anteriority (which would be the time required for taxpayers to prepare). This period consists of a period of transition, which can reach 50 years, so that companies can adapt to the new system.

“The project has the advantage of simplicity, because it ends the difference between goods and services and also the lobby between the various sectors; transparency, as it informs the consumer-voter how much he pays to consume the product; promotes greater political responsibility, as it brings the subject of taxes for the elections; and strengthens the Legislative, which sets the tax rate by law”, said Eurico de Santi.

To cope with this new reality, tax law experts advocate the idea of new tax proceedings. Paulo Cesar Conrado, a federal judge, NEF researcher, and Tax Credit Macro-vision project coordinator, says that it is not possible to think of a new tax structure applying old decision rules.

“The substantive law and the procedural rules mix in Tax Law because the system has the clear function of collecting. And we have to come up with a system that promotes clear procedural law rules in that area, thus easing conflicts between taxpayers and the State’s collection structures”.

Lawyer Suzy Hoffman Gomes recalled that this duality goes back to the Magna Carta of 1215, considered the first Constitution in history, when the people rebelled against the high taxes levied by King John of England. “From that moment on, there was the need for due process to create clear collection rules. But the big problem to create the IBS is that we need to start from scratch. We can’t take advantage of the current model.

To Breno Vasconcellos, a researcher from the Tax Credit Macro-vision project, an alternative to be considered is to establish an instance before the dispute, to promote some kind of bid. “Among the major countries, Brazil is the only one that does not provide this mechanism prior to assessment. The experiences we know of the Brazilian Internal Revenue System have shown us that the system would work very well with these pre-litigious instances”, he said.

Lawyer Eduardo Salusse agrees that it is not possible to use the current procedural model applied to tax law. According to him, it may be necessary to create a new agency or a new court for the demands brought by the IBS, which would co-exist with the current instances, which would naturally wane as the tax lawsuits of the old system were resolved.

The debate series on a new tax system began on March 7, with the debate on tax substitution in the ICMS.

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