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The shift in Brazil’s tax collection liability to marketplace platforms

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Internet usage continues to soar in Brazil

Marcelo Marques Roncaglia and Gabriela Conca of Pinheiro Neto discuss how Brazilian tax authorities are contemplating a response to reflect the country’s increased usage of e-commerce.

Marketplace platforms have played an outstanding role in consumer relations in the last decade, having intermediated a significant portion of sales of goods worldwide. The trend is growing, and projections show that business-to-consumer (B2C) sales will reach $ 4.5 trillion in 2021 globally. In Brazil, e-commerce sales reached R$61.9 billion ($11.3 billion) in 2019, nearly four times higher than the figures from the beginning of the decade . An increase is expected in view of the spread of the internet across the country and an increase in the number of e-commerce consumers, particularly after the COVID-19 pandemic.

The impressive performance of platforms in e-commerce has given rise to several discussions around the world about the role of these agents in collecting taxes. Despite the fact that there has been no consensus in the world or Brazilian communities to date, several Brazilian states have taken initiatives to make marketplace platforms liable for the tax on the distribution of goods and services (ICMS tax) due by platform users. Examples can be found in the laws of the States of Ceará, Bahia, Mato Grosso and, more recently, Rio de Janeiro, which is still pending regulation. In general, these rules hold the platform responsible for paying ICMS tax when the seller fails to issue a tax invoice to cover the transaction.

The main reasons for issuing these rules are the facilitation of inspection by the states (it is easier to inspect large platforms than small and medium-sized companies), the fight against tax evasion and the reduction of unfair competition (from salespersons that use the platform to avoid paying taxes). Although these reasons are plausible and may bring benefits to society, it is important to consider (i) the costs for the platforms resulting from the adoption of these measures, (ii) the inadvertent application of these rules to different business models, (iii) the possible conflict between rules issued by different states and (iv) the appropriate normative instrument for assignment of responsibility.

First, one should take into consideration the platform economic capacity to bear the burden of collecting information on intermediated transactions, parameterising systems, issuing invoices, and collecting taxes, among others. Even though, intuitively, one may think of large marketplace platforms, there are companies of all sizes that may incur disproportionate costs in view of this rule. In addition, any possible increase in platform costs may increase the price of its services, affecting the e-commerce market.

As for business models, there are a number of variations in the platform's performance and its effective involvement with the sales transaction. Platforms may act both as a mere showcase for purchaser to access a specific advertisement and be redirected to the seller's webpage to complete the purchase, as well as accumulate functions (such as payment processing, shipping, etc.). Assigning tax responsibility to the platform despite the model adopted does not seem reasonable, either because the platform is unable to gather information of the transaction necessary to collect the tax or because in many cases it does not even receive the payment from the user and, therefore, has no money to pay the tax due.

It is also important to note that there is neither uniformity between state laws governing the subject nor observance of the territorial limits of the state. The legislation requires platforms that are not even present in the respective state to fulfill obligations in connection with registration in the said state and other ancillary obligations, creating operating and compliance costs. Not to mention the risks related to possible state disputes over the ownership of ICMS in a certain transaction.

Finally, and, more importantly, the instrument to hold the platforms responsible should be in accordance with the constitutional tax rules. In this regard, the state laws enacted have failed to comply with the federal constitution, which attributes to the federal supplementary law the power to establish general rules in tax matters, including tax liability. In the Brazilian scenario, the National Tax Code establishes general rules in tax matters and does not authorise that marketplace platforms be held responsible in the situations presented by state laws.

In short, even though the states may see advantages in increasing revenues by holding platforms responsible, there have been no studies on the impacts of these measures, particularly considering the adverse effects on the platforms and the players depending thereon. Additionally, regardless of the results obtained, the implementation of this rule depends on the appropriate normative instrument, which in this case is the federal supplementary law.

Marcelo Marques Roncaglia

T: +55 11 3247 8752


Gabriela Conca

T: +55 11 3247 6269


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