GUERRA FISCAL - DA ORIGEM E ATUALIDADE

Takeaways

• 😀 The general framework for tax regulation in Brazil is determined by Complementary Law 87 of 1996, but each state has the power to adjust certain aspects of the tax system within their jurisdiction.
• 😀 States like Rio de Janeiro offer significant tax incentives, reducing ICMS (state sales tax) rates to boost business competitiveness and attract investment.
• 😀 Tax benefits like reduced ICMS can lead companies to relocate to more tax-friendly states, such as Espírito Santo, which is known as a tax haven in Brazil.
• 😀 This practice has resulted in a 'fiscal war' between states, where states compete to offer the most attractive tax incentives to businesses.
• 😀 The fiscal war allows states to reduce tax burdens for companies, but also leads to a loss in state tax revenues in the short term, which may be offset by indirect economic benefits from new investments.
• 😀 A legal barrier, established by Complementary Law 24/1975, required state approval for granting tax benefits, with the unanimous consent of all states needed for a benefit to be approved.
• 😀 However, states began bypassing this approval process by issuing unilateral decrees or creating internal regulations to grant tax benefits without seeking approval from other states, further fueling the fiscal war.
• 😀 Some states, like São Paulo, with more conservative tax policies, challenged the constitutionality of these unilateral benefits in the Supreme Federal Court (STF), arguing they violated the guidelines established by Complementary Law 24.
• 😀 The STF initially declared many of these benefits unconstitutional, but many states simply reissued the same benefits under new names, which delayed any real legal impact.
• 😀 In response, the STF proposed Summula Vinculante 69, declaring all unapproved tax benefits unconstitutional, which could have led to widespread legal instability, prompting Congress to intervene and pass Complementary Law 160.
• 😀 Complementary Law 160 (2017) introduced a new system for approving tax benefits, providing a legal framework for states to issue benefits transparently, and making them valid if they followed the guidelines set out in the law.