VALUE-ADDED TAXATION AND THE TAXES ON CONSUMPTION IN BRAZIL: EXTERNAL INFLUENCES

ANDRÉ MENDES MOREIRAPROFESSOR OF TAX LAW – MILTON CAMPOS SCHOOL OF LAW (BRAZIL)PhD IN TAX LAW – UNIVERSITY OF SÃO PAULO (BRAZIL)

1

University of Wisconsin – Madison, USA –Seminar on International Tax Norm Transmission – April 29th, 2010

TAX BURDEN IN BRAZIL

2

VAT: THE BEGINNING

GERMANY

1918

FRANCE

1948

VAT

Von Siemens

3

SOURCES OF INFLUENCE REGARDING THE ADOPTION OF

VAT

INTERNATIONAL MONETARY FUND

FRENCH EXPERIENCE

E.C. DIRECTIVES“Member States shall replace their present system of turnover taxes by the common system of value added tax”. Article 1, First Council Directive 67/227/EEC (1967)

“The IMF has focused over the last twenty years on implementing a VAT in all countries”. Miranda Stuart (2003)

“The Neumark Report, as it was constantly referred, was submitted in 1962 which gave birth to the value-added tax”. F. Andic & A. Reisman (2007)

NEUMARK REPORT

4

THE SPREAD OF THE VAT TIME PERIOD

COUNTRIES ADOPTING THE VAT

NUMBER OF COUNTRIES

1948-59 France, Brazil 02

1960-69 Germany, Uruguay, Sweden, Denmark, Netherlands, Côte d’Ivoire

06

1970-79 UK, Chile, Peru, Colombia, Korea, Israel, Italy, Argentina, Ireland, Palestine, Peru, …

20

1980-89 Turkey, Portugal, Mexico, Japan, Niger, Taiwan, Senegal, Morocco, Guatemala, …

19

1990-99 China, Canada, Paraguay, Ghana, Finland, Russia, Jamaica, Vietnam, Venezuela, …

75

2000-06 Australia, Sudan, India, Namibia, Ethiopia, Zimbabwe, Cape Verde, Botswana, Laos, …

14

5

MORE THAN 20 TRILLION DOLLARS IN TAX REVENUE/YEAR.

VAT/TOTAL REVENUE (ESTIMATED PER COUNTRY)

% WORLD'S POPULATION

6

7

1500 1822

IndependenceDiscovery

8

1824 1891 1934 1937 1946First Constitution Republic of Brazil Constitution Constitution Constitution

9

Coup d'état

1964

Tax Reform18th Amendment

1965

Democratic Constitution

1988Constitution

19671st Amendment

1969

10

11

OLD SALES TAXES VALUE-ADDED TAXES

FEDERALCONSUMPTION TAX TAX ON MANUFACTURED PRODUCTS(PAID BY MANUFACTURERS)

STATETAX ON SALES AND CONSIGNMENTS TAX ON THE SALE OF GOODS(PAID BY MANUFACTURERS, WHOLESALERS AND RETAILERS)

12

CONSUMPTION TAX

LAW No. 2.974/56

LAW No. 3.520/58

VALUE-ADDED TAX

FRENCH INFLUENCE

13

THE FULL ADOPTION OF VALUE-ADDED TAXATION IN BRAZIL

1965 PROFESSOR CARL S. SHOUP “The Tax System of Brazil”

“The state-level VATs in Brazil were the first operating examples anywhere of value-added taxes extending through the retail level, and Professor Shoup clearly had a hand in this occurrence.” Malcolm Gillis (1991)

“Shoup played a key role in the acceptance by the Neumark commission of the VAT as the standard form of sales tax in the European Community.” Wayne Thirsk (1991)

14

A NEW CHAPTER: REDEMOCRATIZATION & THE

1988 CONSTITUTION

15

THE NEW CONSTITUTION

MAINTENANCE OF THE GENERAL LINES OF THE 1965 TAX SYSTEM

DECENTRALIZATION EFFORT

TAX ON MANUFACTURED PRODUCTS SAME CHARACTERISTICS

TAX ON THE SALE OF GOODS BROADER BASE TRANSFER OF

TAXING POWER FROM THE FEDERAL GOVERNMENT TO STATES

16

VALUE ADDED TAXATION HISTORY IN BRAZIL: THE LAST

STAGE

FEDERAL TURNOVER TAX

LEVIED ON GROSS REVENUE

CONTRIBUTION FOR THE SOCIAL INTEGRATION PROGRAM

CONTRIBUTION FOR THE SOCIAL SECURITY

17

APPROVAL OF THE 42nd AMENDMENT TO THE 1988 CONSTITUTION

CREDITS OFFSET CALCULATED BASED ON GROSS REVENUE

IMF INFLUENCE

18

CONCLUSION

19

✔

✔

✔FRENCH EXPERIENCE

SHOUP REPORT

INTERNATIONAL MONETARY FUND

CONSUMPTION TAX/TAX ON MANUFACTURED

PRODUCTS(FEDERAL)

TAX ON THE SALE OF GOODS(STATE)

SOCIAL CONTRIBUTIONS ON GROSS REVENUE

(FEDERAL)

VAT

20

THE NEXT STEP

TAX ON MANUFACTURED PRODUCTS

TAX ON THE SALE OF GOODS AND SERVICES

CONTRIBUTION FOR THE SOCIAL INTEGRATION

PROGRAM

CONTRIBUTION FOR THE SOCIAL SECURITY

NEWFEDERAL

VAT

21

THANK YOU VERY MUCH!ANDRÉ MENDES MOREIRAandre@sachacalmon.com.br

22