Brazilian retailers, industrial companies go to the Supreme Court to denounce tax inequality
19/01/2024
Data obtained by Valor show that from August to December 2023, after the start of the Remessa Conforme program—Portuguese for “compliant shipments,” which established new import rules for orders up to $50—tax revenues reached R$700.5 million, an increase of about 122% over the same period last year.
The issue of tax collection is gaining momentum at a time when one of the most important aspects of the program—the tax relief of international online marketplaces that participate in the program—is before the Federal Supreme Court (STF). Brazilian retailers and industrial companies are challenging the lack of tax equality between local and foreign companies.
Remessa Conforme was defined in a decree issued by the Ministry of Finance and has been in effect since August 1. It grants tax and customs benefits to foreign online platforms, such as exemption from the 60% import tax, as long as they source their shipments in Brazil. However, a sales tax, the ICMS, is still levied at 17%.
The data is part of a survey by Brazil’s Federal Revenue and shows that despite the tax break, there has been an increase in revenue due to an increase in the number of statements for shipments over $50 that are taxed—one of the goals of the tax authorities with the change.
Valor has also learned that the increase in revenue may reflect an improvement in the inspection of products entering Brazil. The tax authorities have been working on this in recent months. However, shopkeepers can still try to circumvent the rules by making statements of more expensive products as if they cost less than $50 (to obtain the exemption). However, the Federal Revenue detects the wrongdoing in these cases and charges a 60% tax.
Remessa Conforme involves voluntary compliance by businesses, so shopkeepers who do not comply will not get advanced customs clearance on sales up to $50. And they still have to pay 60% tax, plus 17% ICMS—which also increases the tax revenue. Currently, AliExpress, Shein, Shopee, and Mercado Libre have joined the model (Amazon is still implementing it).
According to the data obtained, from August to December 2022, only 2.4% of all postal shipments were reported, and in 2023, the percentage increased to just over 60%. Of this 60%, 44% were statements registered through the Remessa Conforme mechanism. The Ministry of Finance declined to comment on these figures.
From August to December, ICMS collection reached R$120 million, 10 times more than the previous year. Import taxes amounted to R$580 million, an increase of 92%.
With the new rules and early local sourcing of shipments, the Federal Revenue is increasing controls and trying to reduce fraud—the main reason for the change in rules.
There is a perception in the government that shopkeepers hosted on the platforms are falsifying data about the sender of orders to fall into the only category that was exempt from tax until August —that of person-to-person sales. Since August, the exemption also applies to shipments from foreign companies.
Local retailers, Brazilian industrial companies, and foreign online platforms have already spoken out in favor of the program, saying it tackles the problem of fraud and creates workable rules for imports. Since 2021, a series of meetings have been held with economic institutions and the tax authorities to draft the program.
The disagreements between the parties were therefore never about Remessa Conforme but about the idea of linking the model to an import tax break—something that was not discussed before the changes were announced.
This aspect of tax collection is becoming more important today, because among the alternatives for increasing tax revenue that the government is analyzing in the search for a balanced budget this year is the inclusion of this revenue from imports.
This could be further strengthened with the definition of a rate and the end of the exemption in 2024. The Ministry of Finance has discussed a rate between 17% and 20%, which could be as high as 28% on packages sent. The issue is under discussion at the ministry. There is a possibility of a staggered increase over the year, sources say.
The problem is that since there has been no definition of a rate so far—the public debate on the subject began in April 2023—the Confederations of Commerce and Industry (CNC and CNI) filed a direct action of unconstitutionality with the STF on Wednesday night, alleging a lack of tax equality.
The local chains claim to pay more than 100% tax on the production chain and the sale of goods. The Ministry of Finance was aware of this move by the CNC and CNI before the announcement, as Valor reported on Thursday.
The federal government has yet to define its line of defense in the lawsuit, but the initial reading is that Remessa Conforme already tackles the main problems identified by the sectors.
In the government’s view, Valor found out, with Remessa Conforme, the Federal Revenue already has control over small shipments entering Brazil. Therefore, it would already limit any wrongdoings, and the platforms that have joined are fulfilling the requirements to be within the new rules.
The companies argue in their petition that acts numbered 1,804/80 and 8,032/90 establish an exemption only for individuals for non-commercial international shipments. Therefore, they do not apply to shipments by companies as defined in the Ministry of Finance’s regulation. According to the companies, this definition is contrary to the law.
However, a source calls into question this point made by the associations. He said that wrongdoings existed before the program, with businesses posing as individuals to send packages into the country without paying taxes. He also claims that the zero tax rate was a decision by a minister who had the power to set it.
The Federal Attorney General’s Office (AGU) is still waiting to be asked to act in the case, based on the line of defense to be drawn with the rest of the government. The case was sent to STF’s Justice Cármen Lúcia on Thursday.
In the past few months, the discussion about the definition of a zero import tax has been growing among national retailers because of the risks that it could bring to the business, in the opinion of national companies. They claim that the entry of goods, especially from Asia, under these conditions poses a risk to local job creation and may not comply with Brazilian health monitoring standards.
The issue was the focus of a presentation by retailers at the last meeting of the Council for Sustainable Economic and Social Development (CDESS) with President Lula in December.
*Por Adriana Mattos, Jéssica Sant’Ana, Guilherme Pimenta — São Paulo, Brasília
Source: Valor International