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Special Release -Tax Antecipation
by Professor Edison Freitas de Siqueira, President of the Institute for the Studies of Taxpayers’ Rights

If a foreign importer, based in the Virgin Islands, buys Louis Vitton handbags in China, with the approval of Louis Vitton from Paris, for $ 200 dollars and then re-sells them with loss - the same bags, for $ 5.00  to a company in Brazil this is not a TAX CRIME, but a company's business strategy to minimize the effects of early tax collection. This strategy is not a crime, it brings no injury to the tax authorities or public treasury, on the contrary, only advantages! Let us see the reasons why.

The fact is that any Brazilian company that buys products using the strategy described above, and thus low accounting for a low acquisition value, and then reselling for a high value, will in fact increase the calculation basis of Brazilian taxes like the ICMS (Added Value Tax), the COFINS (Tax for social equality) of IRPJ (income tax) and CSLL (tax for social equality on profit) and therefore, not bringing any loss to the tax authorities. This is why the entrepreneur will buy these products for a lower price, including increasing its taxable profit margin, which is always higher as lower the purchase price is in relation to the sale price. This ends up promoting the Brazilian State or Federal tax authorities.

What justifies this apparent paradox of the taxpayer, which increases their tax burden is the fact that if they do not do this they will have to pay taxes before selling the goods, or even before their businesses generate revenue and many times they have to pay taxes for products still stuck for months in customs.

What the entrepreneurs try is to pay taxes after having received the payment for their services,  even if for a higher tax value. The sacrifice of the taxpayer is so big they would rather waive the tax credits for imports (that are a right of taxpayers in Brazil), because the purchase of the imported products for a low value decreases the benefit of the tax credits generated in the purchasing. However to pay taxes before selling the goods is of greater  violence, there is no way to make money  without selling or before selling.

Contrarily to this reasoning, there is a systematic and illegitimate procedure of the Brazilian Federal Revenue that typifies the above described practice as Tax Crime. The violence against taxpayers rights is so disproportionate there already are convictions against employers with penalties close to 100 years, condemning defendants whose greatest crime was to create jobs and to maintain businesses that pay millions of dollars in taxes. Such court decisions are illegitimate because they forget that that there is no tax crime if there is not loss for the Federal or State Treasury. In the case above mentioned what happens is the opposite there is increased revenue,  increased employment and increased paying of taxes.

Furthermore, it is important to note that operations carried out abroad are not under the jurisdiction or under the impact of the dumb Brazilian acts and bills. You can not want to enforce the laws on business and Brazilian sales abroad. Any student of law knows that the second half. Even more is the intention of the tax is illegitimate and unjust. You can not blame anyone in Brazil for business legally made abroad.

What the Daslu did, like many Brazilian companies are forced to do so as to keep their doors open, was struggling to pay their taxes after receiving the sale value from their customers.

Collecting taxes before the sale was made or the payment by the final consumer impede economic growth advocated in Article 3 of the Federal Constitution.

For any merchant or industry it is not possible to keep in their shop windows goods like electronics, luxury items, perfumes, and other imported delicacies for they have no certainty of the sale. This occurs in Brazil: taxes are collected if one has products for sale and not for the sale itself. So one cannot find any legally traded  Play Station in shopping malls anywhere in Brazil. If one wants a PS2, as well as other products, one has to order in advance.

The PlayStation-Sony sold in Brazil is the most expensive on the planet, and the Louis Vitton Purse sold at Daslu shops is most expensive on earth. If there is or not such a case like "Daslu" it is true to say that the Brazilian legislation has thrown into informality (illegality) the trading of a whole series of articles that are not manufactured in Brazil.

The Daslu Store is only one example of a company headed by a woman who had the courage to show publicly her face and to pursue her dream of creating hundreds of jobs and having a store of luxury goods without hiding herself in some obscure gallery of March 25 Street in Sao Paulo or  in the “Paraguay” Fair in Brasilia (both are popular locations where smugglers sell their products). These places are known and visited by everyone.

The tangled tax legislation in Brazil is full of traps that make it impossible for operations in some sectors of the economy, that is the reason why Brazil is the world champion of informality in economy and the world champion of high interest rate. For this reason the businessmen, in a  legitimate attempt, try to find alternatives to continue operating even under the permanent threat of imprisonment that may come from some reckless court decision that may consider these businessmen more dangerous than rapists, murderers or corrupt politicians.

All entrepreneurs should be able to pay their taxes after receiving the value of the sale price for their products or services.

To pay taxes before the sale of the products or services obliges all employers to take loans in the Brazilian banks that charge the world highest interest rates. How are entrepreneur going pay taxes on goods that were not sold yet? And no meeting of COPOM (Brazilian Monetary Commission) that can change this: SELIC (interest rate) by 11% in the year and bank interest of 9% per month.

We must urgently change the tax laws, ruling out the stupid and anti-development requirements of having to pay taxes before the sale or creation of wealth. We must stop taxing the entrepreneurial effort and start to collect taxes from the wealth generated by businesses. Not even in the time of the most truculent Portuguese colonialism such an absurd happened, that time the king collected taxes on the gold that had  already been extracted, not on the expectation of extracting it.

It is absurd to think that this stupid and anti-development reasoning condemned - at least in a primary court - Eliana Tranchesi’s company for the crime of having acted just like any business person from the United States or Britain, countries that do not charge taxes on goods imported from other countries except when there is a final sale to consumers within their territories. To generate jobs, revenue and taxes in a country that disrespects what is written in Article 3rd of its own constitution, and to write laws that create protectionism condemned by the WTO, may be the only crime!

If Eliana Tranchesi (owner of the Daslu shop) is a criminal so are all businessmen from Italy, Britain, USA or any other developed country that does not practice protectionist taxes on products entering their harbors. If the Daslu Shop were in England or Italy it would not need to buy its products at  loss from another company so as to achieve compliance with the Brazilian unfair tax obligations.

Join the movement against TAX ANTICIPATION, it is precisely this practice that breaks even with the guarantees of  the Brazilian constitution, visit our website and learn how to participate http://www.direitosdocontribuinte.com.br.

*Dr. Édison Freitas de Siqueira is an internationally renowned tax lawyer and Serbia Consul in Brazil.


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