There is no doubt that we are living in a unique moment in the history of Brazil's tax system. Discussion on the topic has become a priority of civil society, which, in itself, is excellent news. There has long been talk of the need for tax reform in the country, but there have been few times when politically viable projects have evolved to become the subject of a broader debate, spurred on by the executive branch and, especially, the legislative branch, as we see happening now.
It is equally unquestionable that the attempt to simplify a chaotic tax system is absolutely praiseworthy and deserves to be taken seriously, especially when that system has as its backdrop a massive list of taxes, considerable uncertainty in the interpretation of its rules and, as a result, one of the biggest litigation sources (perhaps the biggest) in the world.
- The social integration programme, or PIS (Programa de Integração Social);
- The contribution for social security financing, or COFINS (Contribuição para o Financiamento da Seguridade Social);
- The tax on industrialised products, or IPI (Imposto sobre Produtos Industrializados);
- The tax on sales and services, or ICMS, which applies to the movement of goods, transportation, communication services, and other general supplying of goods (Imposto Sobre Operações Relativas à Circulação de Mercadorias e Serviços de Transporte Interestadual de Intermunicipal e de Comunicações); and
- The tax on services, or ISS (Imposto Sobre Serviços de Qualquer Natureza).
In addition to PEC 45, we have Constitutional Amendment Project 110 (PED 110), underway in the Senate, which proposes the unification of federal taxes only. Finally, there is the possibility of a federal government project, whose main feature would be the creation of a new tax on the movement and transfer of values to finance social security and which would reduce the financial burden on payroll. This would consequently lead to the creation of formal jobs in the country.
It is important to note that constitutional amendments may alter the Constitution, provided they do not affect the so-called entrenchment clauses. Those involve the individual rights and guarantees, such as federalism, which guarantee autonomy for Brazil and its states and municipalities, including in matters of taxation.
Simplification is essential, and we have a unique opportunity to make it a reality. However, to consider it as an isolated objective, without addressing other topics, is to waste a rare opportunity to mobilise civil society and make taxation in the country a tool of tax justice and social development. Fostering a broad, deep, and definitive debate is the best legacy we can leave for future generations.
Glaucia Lauletta Frascino
T: 55 11 3147 7654
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