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Brazil´s tax regime is described as perplexing and cumbersome, even a “madhouse”, baffling taxpayers and their advisors alike. In fact, Brazil remains at the top of the list in terms of the number of hours typically spent during the calendar year by companies to comply with tax filings and payments. This Article covers the more salient features of the country’s legislation focusing on the determination of taxable income (distinguishing taxes on net income versus presumed profits); indirect levies on consumption at the federal, state and municipal levels; cross-border transactions (including interest on net equity payments, and application of tax treaties); ending with the timeconsuming resolution of controversies. Comparisons to the laws of its Latin American neighbors are made where pertinent. Previously, an overview of tax collections is offered, along with a brief historical perspective before and after independence.
The author offers specific recommendations to simplify the Brazilian tax system, with the goal of reducing compliance costs for local businesses while simultaneously increasing the nation´s attractiveness for foreign investors. Specific proposals include: (1) combining the two corporate income taxes into one single levy; (2) eliminating the multiple assessments triggered upon a cross-border payment; (3) consolidating the various levies on consumption into a single national value added tax; and (4) enabling taxpayers to conclude settlement agreements with government officials, at least with regards to routine matters, reducing the heavy caseloads tribunals currently face. In essence, synchronizing Brazil’s tax laws to those adopted by other OECD-member nations should be the prime objective
