The Brazilian tax system is all based on the Federal
Constitution. Unlike in most countries, where the Constitution
is very small and establishes only the basic guidelines that
direct society, leaving the construction of the legal system to
the laws, the Brazil Constitution is extremely thorough,
especially in terms of tax law, having established all
parameters that must be followed in the institution of
Although the Constitution establishes all principles and
rules that must be complied with in the institution of taxes,
the Brazilian legislation is extremely defective, confusing,
and has on many occasions violated what has been provided for
by the Constitution. This all leads to taxpayer uncertainty and
generates the need to file lawsuits to have such laws declared
Taking into account that the Brazilian Constitution has the
rules and principles that direct the tax law, the great
majority of the discussions regarding the legislation need to
be analysed by the Federal Supreme Court, which has to examine
possible violations to the Federal Constitution.
The journey through all instances all the way to the Federal
Supreme Court in average does not last less than three years.
For that reason, a very useful instrument in the fighting
against the harmful effects of the unconstitutional laws is the
granting of a preliminary relief, authorising the suspension of
the enforceability of the tax, which is, providing the taxpayer
with the right not to pay the tax that has indications of
unconstitutionality, until the final decision by the judiciary
Obviously the suspension of the enforceability of the tax
may only be justified when the judge identifies that there are
elements of merit which corroborate the arguments of the
taxpayers for the unconstitutionality of the law.
However, what has occurred in the Brazilian judiciary is the
constant resistance in determining the suspension of the
enforceability of the tax under the argument that tax
collection "will not prevent the maintenance of the activities
of the company", or "if the company has been paying the tax,
there is no reason to stop doing it now".
The judges assume that if the taxpayer can afford to pay the
tax until the final decision of the Federal Supreme Court on
the unconstitutionality of the law that instituted such a tax,
it may continue doing so and, if the taxpayer wins the suit, it
may request the refund of the unduly collected amounts.
However, taxpayers may not be subject to the collection of
taxes where unconstitutionality is evident even before the
final decision of the Federal Supreme Court, under penalty of
consciously violating the ability-to-pay principle and the
right to property, and of collecting a confiscatory tax.
In addition to that, ordering that the taxpayer collect a
tax that seems to be unconstitutional for understanding that
"it may later request the refund" is the same as ordering that
such taxpayer be subject to the slow system of refund and
compensation of taxes of the Brazilian Revenue Service, whose
answer may take years.
We do not expect that the judges suspend the enforceability
of every tax where the law is claimed to be unconstitutional by
the taxpayers. What we intend is that the judges, aligned with
the principle of morality, which is imposed upon them and based
on the interpretation according to which a certain tax law is
unconstitutional, do determine the suspension of the
enforceability of the tax, under penalty of unfairly punishing
the taxpayers with the need for collection and later exercise
the right to refund/compensation.
This article was written for International Tax Review
by Alessandra Gomensoro, a partner, and Ricardo
Cosentino, a tax lawyer, in the tax department of Mattos
Filho, Veiga Filho, Marrey Jr e Quiroga Advogados.