By the end of 2018 the Brazilian government created a new way to interact with taxpayers, a mechanism to prevent tax advantages for companies over their competitors. With the new system, a company can inform the authorities if another market participant has obtained a court decision to pay less taxes.
With the information, the public tax attorneys will be in charge of seeking the decision to prepare strategies to defend the state.
The objective of this channel is to maintain fair competition between different corporations within the same industry. Differences in taxes result in market imbalances, as lower tax payers can afford to reduce their prices while their competitors find it difficult to compete and remain profitable.
In real life, however, it seems that the only objective of this new mechanism is to discourage taxpayers to proceed with new cases to courts. The new system, at least for now, does not seem to deliver as one would expect. As such, until this process is more mature, in my opinion, taxpayers should seek to equalize the equation by achieving at least the same terms as their competitors. Instead of reaching out to the tax authorities to report a court decision favoring one of their competitors, they should try to obtain the same court decision. This way, pricing balance and fair competition is achieved.
The information provided in this article is for general information purposes only. The information is not intended to be comprehensive or to include advice on which you may rely. You should always consult a suitably qualified professional on any specific matter.
Gabriel Quintanilha is based in Rio de Janeiro. Gabriel has been an attorney at law since 2006. He is also Professor of Tax Law at Fundação Getulio Vargas – FGV and IBMEC. Author of books and articles published in Brazil.
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