The professor Breno Ferreira Martins Vasconcelos, who teaches in the undergraduate program in Law at Insper, in addition to being a researcher at the Center for Taxation, was chosen as a representative of higher education for the National Network for Proper Treatment of High Litigation in Tax Disputes. The participation and partnership take place through the Center for Taxation, led by Professor Vanessa Canado.
The National Network, established by the National Justice Council (CNJ), aims to bring solutions to avoid the high volume of litigation observed in the tax sphere. To this end, the group will promote, among other actions, cooperation between administrative and judicial tax environments so that tax legislation, observance of precedents in tax matters, and proper resolution of tax conflicts are applied uniformly. Additionally, it will propose institutional protocols for exchanging information, evidence and diligence, and actions for assistance and guidance to taxpayers, prioritizing active transparency and cooperation in tax relations.
“We already had the first meeting in March, which was in person at the CNJ headquarters in Brasília. Each of the nominees introduced themselves and made some suggestions. My proposal was that everyone in the Network should know about the empirical data and findings of the Diagnosis of Brazilian Judicial Tax Litigation, developed by Insper in partnership with the CNJ,” highlights Breno. This study, published in 2022, provided recommendations for the Executive, Legislative, and Judicial Powers to combat high tax litigation.
“After we delivered this diagnosis to the CNJ, which, with the help of artificial intelligence, analyzed over 750 million judicial decisions and more than 70 research questions related to 12 major hypotheses on the formation of tax litigation, the National Justice Council created the National Network for Proper Treatment of High Litigation in Tax Disputes, demonstrating that this initiative is intrinsically linked to the study developed by Insper,” he adds. At the same time, a Commission of Jurists was created in the Federal Senate to draft legislative proposals to modernize the tax process.
In total, the Network has 26 members, with two from civil society — one representative from the Federal Council of the Brazilian Bar Association (OAB) and one from higher education institutions (position held by Breno). “The 24 members who are not from civil society make up the Brazilian tax justice system, as well as representing the tax administrations of federative entities,” says the professor. This shows, in his view, the commitment of Justice and tax administration to reduce conflicts between taxpayers and the Tax authorities.
“Part of this process is the integration of administrative and judicial tax litigation because they currently operate almost independently, without dialogue, with administrative judges rarely observing judicial precedents in their decisions,” observes Breno. Another pressing need is to prioritize taxpayers' guidance through active transparency, allowing them to know exactly the interpretation given by the tax administration to legislation. “Currently, taxpayers need to request this interpretation, which is time-consuming, subjecting them to tax assessments during the period they await the response. This creates legal uncertainty,” he explains.
These situations were reported in the diagnosis produced by Insper. “Many of the reasons explaining judicial litigation are before the judicial process. We have a massive amount of litigation, not just because of problems in the judicial process, but because of prior failures to the Judiciary that, if corrected, can prevent it,” he says. In this context, it is relevant to invest in rationalization and simplification of tax legislation, instruments for extrajudicial conflict resolution, and tax governance (such as restructuring the processes of drafting, applying, and interpreting norms).
At the first meeting held by the Network, some of its members, including Professor Breno, expressed concern about the issues that will arise starting next year, which marks the beginning of the implementation of the indirect tax reform. "As we stand today, according to the constitutional amendment and the complementary legislation of the reform, it is not possible to operationalize judicial discussions on the collection of IBS (Tax on Goods and Services) and CBS (Contribution on Goods and Services) in the Judiciary. This is because we do not yet have a procedural rite foreseen to resolve questions related to these two taxes. Since the reform makes changes to the tax competencies of the federative entities, there is concern about the Judiciary's structure to accommodate these demands," he explains.
According to the professor, in the current system, Brazil taxes at the origin, in production, but with the reform, it will tax at the destination. In today's system, if a company wants to discuss a tax issue, it files a lawsuit in the location where it is based. If it is in São Paulo, it files in the city of São Paulo, for example. With taxation at the destination, companies would need to file a lawsuit in each location where there is a sale to the final consumer, for example. "This would create a very complicated and costly situation for the companies, hindering their constitutional right of access to Justice," he states. "The focus of the Network will be on the current problems, but I believe we will also delve into the possible future formation of disputes from the perspective of the tax reform."