Lecture by Gustavo Brigagão on Taxation of the XNUMXst Century
The lawyer, professor of law and president of the Brazilian Association of Financial Law (ABDF), Gustavo Brigagão, spoke about the past and future of taxation. He outlined a brief historical overview of the choices made by Brazil in tax matters and the reflexes they produced in terms of legal uncertainty. He then addressed the new challenges facing the world in the field of taxation.
"Our tax system dates back to 1965, in a world that was completely different," he recalled. “The goods were tangible goods that circulated between industry, wholesale and retail, until they reached consumption. The service was the result of human activity, necessarily. ”
At that time, according to him, while most countries were moving towards a national value-added tax, Brazil chose to create separate taxes for each federative entity - IPI, federal; ICM, then ICMS, for states; and the ISS, municipal. In Brigagão's assessment, this choice created many of the legal problems that would arise in the following decades, as the economy became more complex and the federal units began to dispute the right to tax the new activities that were emerging.
He cited several conflicts and their coming and going through the courts, such as the distinction between goods and services, the characterization of the place where the services are provided and the definition of inputs. Then, he presented a long list of new challenges that countries are facing due to the globalization and technological revolution of the last decades. “These new technologies have made the tax system, not only the Brazilian one, but the international tax system, chaotic”, he commented.
According to him, innovations such as e-commerce, cloud computing, internet of things, 3D printing, software subscription, streaming services, rental of properties by application, sale of consumer data, digital advertising and cryptocurrency brought a series of tax challenges that still do not find satisfactory answers anywhere in the world. “Today, the merchandise can be sold via email. And printing is done at the consumer's home. In other words, the chain that existed for the circulation of goods, it becomes a chain of values, ”he said.
To scale the size of these businesses, he recalled that the five technology giants that make up the acronym GAFAM (Google, Amazon, Facebook, Apple and Microsoft) had a turnover of US $ 767 billion in 2017. “This is equivalent to the GDP of Switzerland”, he compared.
Brigagão highlighted three specific characteristics of these businesses that impose great difficulty on their taxation: not needing a physical presence in the country where the service is provided; have most of its value concentrated in intangible assets; and generate revenue from the user himself. “Providing data from these participants creates value that makes these companies worth billions. Whether through the use they make of this data, or through advertising, the level of audience that the marketing of these companies can reach ”, he explained.
He gave an account of the initiatives that are being studied or proposed by organizations such as the OECD, the G20 and the European Council and initiatives recently adopted by countries like France, Spain and the United Kingdom to tax these new businesses. But he stressed that they still do not point in a clear direction on the best way to tax these companies.
Brigagão also spoke about the difficulties that global companies have in understanding the Brazilian system and made an assessment of the tax reform proposals under discussion in the country today. He defended the adoption of VAT to solve some of the main problems of the current model, such as yours complexity and cumulativeness, and recalled that it is adopted by 165 of the 193 countries in the world. But he considered the way it is proposed in PEC 45 to be inadequate and possibly unconstitutional.
At the end of the lecture, tax expert Everardo Maciel, coordinator of the Seminar, reinforced the points brought by Brigagão on the challenges that countries face to tax the technology giants. However, he presented a point of view contrary to the adoption of VAT, considering it a tribute of the past, while recognizing the problems of the current system. "We are discussing the 1949 solution for the XNUMXst century," he noted.
Brigagão agreed with the obsolescence of VAT, but reinforced his criticism of the cumulative nature of national taxation and returned to defend its adoption to solve problems that affect the development of Brazil. ”I would very much like to be able to tell foreign investors that we have a form of taxation that is compatible with what they know. And today I can't say that ”, he lamented.
Following is the transcript of the lecture:Continue...
Lecture: Legal Security and Taxation of the XNUMXst Century
Speaker: Gustavo Brigagão
Curriculum (Jun./19): President of the Brazilian Association of Financial Law (ABDF); member of the executive committee of the International Fiscal Association (IFA); vice president of the Permanent Forum on Tax Law of the Rio de Janeiro State Magistracy School (EMERJ); director of international relations at the Center for the Study of Law Firms (CESA); coordinator of the “ICMS” working group of the Tax Reform Commission of the State of Rio de Janeiro; professor at FGV-RJ graduate school; and partner at Brigagão, Duque Estrada - Advogados.
Good afternoon everyone. I wanted to thank my dear friend Everardo and Edson for the invitation. I will not do as Heleno did to offer to sit there, because I am not a fool to enter the debate with you. It is an irritating logic.
But this morning, because my theme, as you see: Legal Security and Taxation in the 6st Century. This morning, I turn on the television at 18 am and Fachel and Octavio Guedes are there. And they begin to discuss this issue of the Social Security PEC, which will or will not be voted on July XNUMX. Then Fachel turns to Octavio and says: “What do you think will happen? What are your expectations, what are your predictions about that? ”
He says: “I don't make any long-term predictions. For me, anything that is more than noon the next day is long term. ”
Imagine, gentlemen, my situation of having to talk about how taxation will be in the XNUMXst century.
Here, in relation to what we have of current rules, we have rules that are not understandable, that are not stable and that are not predictable. So we, definitely, according to the lesson we had here with Professor Humberto, we are sure that there is no legal security in the Brazilian system.
But, to understand the 1965st century, we have to see the XNUMXth century, because we are stuck with it. Why are we stuck with it? Our national tax system dates back to XNUMX, in a world that was completely different, a world in which goods were tangible goods that circulated between industry, wholesale and retail, until they reached consumption. The service was the result of human activity, necessarily.
At that time, the cloud was meant to make rain, it didn't keep files. The man hadn't been to the moon, television was black and white. It was a completely different world.
VAT was just created in Europe and also in Japan, opposing a cumulative taxation that prevailed at the time, and we, here in Brazil, in an exceptional regime, created a taxation that was unique in the world.
We spread federal, state and municipal taxation on taxes on industry, goods, businesses and services between three taxes. IPI, former ICM and ISS. We created this cumulative taxation that is very concept-friendly.
Concepts that over time have been brought to the Supreme Federal Court by states and municipalities, in order to bring into those concepts certain activities that were not contained therein. And what did the Supreme? In judging matters relating to states, he extended the concept of commodity. He left the states satisfied with the result, because they saw their competence expanded.
But the moment this competence was expanded, in fact, the competence of the municipalities was reduced, because the moment it expands the concept of merchandise, it decreases the concept of service. And when questions related to the concept of services were brought up, the same was done, there was an expansion of this concept and the corresponding decrease in the concept of merchandise.
So, instead of fixing the problem, we had the Supreme Court aggravating this problem. Creating an intersection zone in which the two concepts can fit. This is the worst tax reform that can exist. It is the tax reform carried out by the Supreme Federal Court. There are eleven people who were not elected by the people. That they have no representation for that.
Then there were conflicts at three levels: Conflicts of competence, conflicts between ICMS and ISS - these are the most traditional conflicts, so to speak. Conflicts between IPI and ISS. After all, are services considered goods? Are they considered industrialization? Can they be considered industrialization or not? Customized industrialization has generated controversial and contradictory decisions that all of you are aware of. Competence conflicts between the states themselves. With regard to the incidence of ICMS on imports, if it takes place at the physical entrance, if it takes place in relation to the place where the negotiator is, the legal importer. ISS issues. That was one of the worst, wasn't it? Place of delivery. That generated judicial decisions for all sides. Jurisprudence for all sides.
We had the conflict in the jurisprudence, which Hamilton Dias de Souza referred to earlier. Here, I highlighted a few: Cofins - professional societies, which all of us here who are partners in service providers were victims. We had a summary of the STJ, which was in favor of not imposing this tax, then the Supreme Court came and decided the opposite. After years, he decided the opposite and without modulating effects. It generated exactly the effect that Professor Humberto referred to.
The IPI rate is zero / exemption. First, it is said that it is possible to credit exempt purchases. Then, in my view, this possibility of zero-rate credit extends erroneously. Then, the jurisprudence returns, removes the zero rate, then removes the exemption. Back and forth. And then it further extends the discussion of the topic, due to the recent decision of the Manaus Free Trade Zone, and says that for the Manaus Free Trade Zone it is worth.
Tax substitution going forward, which Hamilton just mentioned. PIS and COFINS credits. Input concept ... With inputs you already had all possible concepts. Whether in the CARF jurisprudence, or in the STJ jurisprudence. And the STJ's last decision was not enough to solve the problem. COSIT opinions came saying, trying to interpret it in any way. It is in this world that the taxpayer lives in the XNUMXst century, but due to problems created in the XNUMXth century.
Conflicts between powers. Just look at a decision by the Federal Supreme Court, which is favorable to the taxpayer, then the Legislative Power comes and says the opposite through a PEC. This happened exactly with the question of credit, of the possibility of ICM credit even, in exempt acquisitions, the Passos Porto Amendment, Amendment 23/83.
The progressive IPTU, which the Supreme Court said would be contrary to the Brazilian legal system the possibility of progressive IPTU. However, it was made possible through this PEC [EC 29/00].
Amendment 33/01: ICMS on imports by individuals, which was deemed unconstitutional by the Supreme Court and was admitted by PEC 33.
And Amendment 42/03, which reminds me of my eternal guru Condorcet Rezende, which was the Fund to Combat Poverty, which was declared unconstitutional in relation to the rules of Rio de Janeiro and which was made constitutional by Amendment 42. Condorcet said that was the Lazarus Amendment. That she rose from the ashes.
Anyway, this is the situation in which we find ourselves. And what was new to aggravate this issue? And then we are entering, already leaving the XNUMXth century and entering the XNUMXst century, still with regard to national issues, because I divided my talk into two stages. One to address the issue nationally, what are the problems we have here, and how are they being seen abroad as well. And the perplexity doesn't change that much.
What do we have today? Absolute globalization, isn't it? We see here in this world map, we see in the manufacture of a simple Nutella jar, how many institutions this industrialization involves. Where is the company's headquarters. Where are the main suppliers, the supplier establishments. Where are the factories. Where are sales offices. Notice that Brazil is there, in Poços de Caldas, supplying one of the raw materials that participate in this industrialization.
Second, what did we have? The new technologies. These new technologies made the tax system, not only the Brazilian one, but the international tax system, chaotic. Why? What did we have? First of all: cloud computing. We have service, software as a service, platforms as a service, infrastructure as a service. Which are operations that are carried out in an absolutely virtual world and whose competition for the taxation of these operations is done exactly by the states and municipalities.
We have e-commerce. The streaming. Internet of things. 3D printing. That completely changes the world we lived in when the national tax system was created. At that time, as I said, the circulation of goods, it was made by industry, from wholesale to retail and to the final consumer. Today, the merchandise is sold or can be sold via email. And the merchandise is printed at the consumer's home. That is, the chain that existed for the circulation of goods, it becomes a chain of values.
The blockchain, the cryptocurrencies, that we can't even define the nature of these cryptocurrencies. The shared economy. AirBnb and Uber. In fact, they don't have a car. They don't have a hotel. They are the largest company in these two activities, in these two branches.
With that, five big companies appear, which are nicknamed GAFAM, which is Google, Amazon, Facebook, Apple and Microsoft. These companies earn $ 767 billion in 2017. This is equivalent to Switzerland's GDP. The sum of the billing of these five companies.
What are the business brands in the business model followed by these companies?
First place: absence of physical presence. These companies reach markets regardless of whether they have a physical establishment where these markets are located.
Second, the assets of these companies are predominantly intangible. They work on intellectual property. They work by licensing the right to use the intellectual property that belongs to them.
It is a theme, the third brand, which is fundamental, which today is in full discussion in all forums related to this matter, which is user participation. The user in the relationship he maintains, in the digital relationship he maintains with these companies, with most of these companies, the supply of data from these participants creates a value that makes these companies worth billions. Whether through their use of this data, or through advertising, the level of audience that these companies' marketing can reach. This is the situation in which we are in the digital world. As he demands.
And what did the Brazilian legislation do? What happened in the Brazilian legislation? An uninterrupted attempt by states and municipalities trying to tax these operations. Because, many times, they fit both the concept of merchandise and the concept of services.
I brought three examples here. Download or cloud computing. The State of São Paulo considers that it would be taxed by the ICMS. The Municipality of São Paulo says that this taxation would be for municipalities.
Streaming. The Complementary Law 157 of 2016 indicates in one of its items the availability service without definitive assignment of audio and video content, which is streaming. The initial position of the State of São Paulo was that streaming should be taxed by it. Then it changed.
In relation to the placement of advertising. Complementary Law 157 says that the insertion of texts, drawings or materials in any medium would be taxable by the municipal tax. The State of Rio de Janeiro filed an ADI, saying that this is a state responsibility.
So, what we have at the national level is an absolute conflict of competences. Why? Because these concepts, as they were created in 1965, they are no longer suited to this new reality. Because in reality, none of these goods fits neither the concept of merchandise nor the concept of service.
As Alberto Xavier says: “The fact that there is a contributory capacity resulting from the exercise of these activities is not sufficient for these activities to be taxed. There must be a legal provision that these activities should be taxed. ” It is not the Supreme Federal Court that will, through the judicial activism that is peculiar to it, extend concepts that were originally created for another situation, in order to try to make the rules reach those activities that are not being reached by taxation.
I fully agree that no activity, no circulation of wealth should be outside the scope of any tax, but that it be done by the right power. Through the right medium. And that correct way is through legislation. If there is competence designated for this purpose by the Federal Constitution. And it doesn't exist.
This generates, as has been said here, disputes in the order of R $ 3,3 trillion. Brazil is a contingency record. I see Antonio Marcos over there, he can certainly confirm. He is an IBM legal officer. Normally, a large business group, when it will make its comparison of revenues from activities carried out in Brazil with those of other revenues in the rest of the world, I am not saying that it is the specific case, but it is often Brazilian revenue corresponds to 2%, 3%. Tiny compared to the rest of the world.
However, when we look at the percentage of tax litigation contingencies, they are champions. It is 95% of the total contingencies of the entire group. Which investor will come to Brazil in these circumstances?
Undue restrictions on non-cumulativity. Multiplicity of incidences on the same bases. Fiscal war. Fiscal imbalance that generates increased load. I'm not going to go into that because it has been covered a lot here in the previous brilliant presentations.
We will now enter the international plane. We saw the national plan. Let's see the international plan. What do we have in the world? That IVA that was born there in the middle of the XNUMXth century became that here. In fact, this is a world map of the International Monetary Fund. It is out of date, because those countries in Africa already have VAT or are in the implementation phase, Angola is in the implementation phase and the Middle East already has VAT. So, in fact, the world would be more colorful there.
So what do we have? There are the dates. The colors are related to the time when VAT was imposed in each part of that world. There are 165 countries that adopt VAT. IVA has a number of defects and our dear Everardo Maciel, I'm sure he will ask me a question related to that. There are 165 countries.
Yesterday, at an event, I was with Professor Schoueri and he asked a question. And in this question, he assumed that the investor, when he is going to invest in a country, he wants to know if he understands the tax that will affect his operations. He understands VAT.
When he gets here what does he see? He sees IPI, ICMS, ISS. And worse: when we see this second world map here, which is provided by Ernst & Young, we see that, there, you notice, green is what allows it, it allows the tax that is collected in previous chains to be refunded , through credits, obviously, for non-cumulative taxpayer techniques. Yellow is the “full carry forward”, that is, those countries that push this refund with their bellies. And blue would be the “limited carry forward”, that is, those that push more or less. Look at the color of Brazil: [yellow].
In other words, we do not have VAT under Brazilian law. We don't have VAT. With all the issues related to non-cumulativeness, with this fight over the concept of inputs in PIS and COFINS, with the issues, with the restrictions that exist in the credit. Whether from IPI, which cannot, for example, there is no possibility of credit in relation to the acquisition of assets. Be the restrictions that exist in consumer goods for ICMS. Be it the impossibility of returning the ICMS that is due in case of export. That makes us classified there. With these taxes that currently exist. In the yellow.
What does the investor have to do? Insert the value of indirect, non-cumulative taxes, as a cost and as an increase in its price, making Brazil extremely uncompetitive. Notice, gentlemen: the credits that are recorded in the accounting, the auditing companies have them removed from the assets, because they know that they will never be returned to the taxpayer. This is the worst of all.
And then, we had, in relation to these new technologies, we had the practice of tax planning considered extortionate. So, taxpayers were considered to be extremely bold. While in Brazil we have the taxpayer at bay, abroad we have the bold taxpayers.
And they started by exploring a series of regulatory gaps, such as misusing the concept of residents. The use, for example, the United States determines that the taxpayer, for him to be considered a resident there, he has to institute, create, incorporate his company in American territory. While in Ireland I have to have the management of the company located there. What did companies start to do? They put management in the United States and incorporate the company, create the company in Ireland. So I am not considered a resident anywhere.
Or else I have the fragmentation of activities that would be conducive to the characterization of permanent establishments. All the items that are necessary for the characterization of a permanent establishment, I remove one of these items and place the rest of the items in one country and that missing item in another. So I don't have a permanent establishment either in one place or another.
Artificial transfer of profits to jurisdictions with low or no taxation. This generated widespread dissatisfaction worldwide. Nobody accepted this to the point that an English parliamentarian turned to a Google administrator and said: "I am not accusing you of committing illegal acts, I am accusing you of committing immoralities". Because he does this type of operation and it results in paying taxes nowhere. On the principle of solidarity, he should pay taxes on the operations he carries out.
There, in relation to this new economy, the digital economy, the intervention of three bodies was created basically: the OECD, the European Union and the G20. I will quote here, briefly, how the discussion took place in these three areas.
First, OECD. When the OECD saw this scenario created by these extortion plans, it created an action plan that would consist of fifteen actions, which would basically address issues related to the coherence, substance and transparency of legal-tax relations. It created fifteen actions.
Action plan number 1: digital operations. (The others concerned one of those three approaches that could be given to issues related to these tax planning.) What was said in Action Plan One? The digital economy, it is not an economy that should be seen separately. She, in fact, her tendency is that she will become the economy itself. So what is going to be done here, said the OECD, is to get Action Plan 1 to talk to all the other action plans.
So, for example, the action plan for permanent establishment. Rules began to be created that would prevent or place greater emphasis on certain items of configuration of this permanent establishment. So, in certain situations, the fact that I have a warehouse in a certain country, that would be enough to set up a permanent establishment if that activity, for that specific economy, was not ancillary. And so it was done with several other aspects that time does not allow me to extend any longer in examining this here.
This was implemented, there was an initial report in 2013, then a final report in 2015, and in 2018 there was this “Interim Report”, in which they examined in what situation, a kind of monitoring of the implementation of Action One. he verified is that, “look, we still have no way to examine, this is still in the implementation phase”, but these rules, for example, I mentioned here as an example the issue of permanent establishment, which I just mentioned. The conclusion was that there was low adherence to the new rules on permanent establishment. In other words, the solution that was given to the countries so that they could somehow tax the operations carried out, they were not adopted, because they did not adhere to this multilateral instrument. Without this accession, your treaties would be without the rules that would be related to this matter.
This report, he also portrayed what was happening in other countries. Unilateral measures that have been taken. Because countries were not inert about the fact that Action One did not produce the effect that was needed. So what happened was that certain criteria started to be used to attract taxation to the territories of certain countries. Then the significant economic presence was created, with definitions that were related to the number of contracts signed, of financial volumes that circulated by companies in the territory of these countries, this was adopted by Israel and India. A permanent virtual service establishment was created in Saudi Arabia and other similar measures in other countries. I'll get back to that in a few seconds.
Another measure: taxation at source, this is already adopted by us. This is already adopted by us. And the return of the turnover tax, the taxation on revenues, this was done by the equilization levy, by India - which has just undergone a reform, which in fact has gone through bad pieces.
Levy equalization was a form of compensation, that is, if taxation is taking place all over the country, India created a tax on the billing (6% rate) on all online advertising revenue. It is a way of equalizing external taxation with internal taxation. There is, in fact, due to the application of these regimes, the possibility of double taxation. Because treaties allow for income tax offsetting, this is not income tax.
The European commission basically resulted in two proposals from the meetings held within its scope. A short term one, very similar to that of the OECD, which was the creation of the provisional turnover tax on these revenues arising from these GAFAM activities. And a second proposal that was the creation of the digital tax presence, very similar to the OECD.
It turns out that, in December 2018, these proposals, despite having been approved by the European parliament, there was no unanimity necessary for them to be implemented. There was no unanimity at the European Council, and these proposals were abandoned.
And from there emerged other initiatives for the unilateral implementation of a provisional digital tax, all of which were levied on revenue, by France, Spain, the United Kingdom, Poland, the Czech Republic, Austria and others.
In June of last year, in Fukuoka, we had the G20 meeting. The G20, they self-determined the scope of an agreement that will have to be reached by 2020. There was a divergence of understandings in relation to all the criteria that were discussed by the States on how to allocate revenues in relation to a source country or country of residence, those who has some kind of intervention in these activities.
Then, two pillars were created for the discussion of this agreement, which will necessarily be obtained by 2020. First pillar: review the connection elements, profit allocation. And the second pillar is to reinforce BEPS, that is, create a BEPS within BEPS. So that new measures to guarantee anti-erosion of the tax base are taken.
There, a reporter asked José Ángel Gurría what he thought, if it was indeed inevitable the creation of this tax that would determine a minimum taxation on the tax revenues resulting from new technologies. Look at what he replied: “The only inevitable thing is death and taxes. The question here is what taxes, how many and how to charge ”.
I think that this sentence shows the state of absolute perplexity and lack of understanding of what to do, this specifically taxing income, with regard to the digital economy. So we have a national perplexity and an international perplexity in the face of new technologies.
In Brazil, what do we have? This is the last slide. We have a unique moment that we live. I have never seen tax reform, I have followed it closely since 1995, in fact, that was when I had the immense pleasure of meeting Professor Everardo. I follow the reform projects.
[Reporting meeting with Everardo Maciel.] I arrived, it was a weekend meeting, there was the economic team, which included Everardo Maciel, Minister Malan, Minister Tourinho, right? There was the commission he represented, the National Congress commission, which was Mussa Demes. Remember that one, back there, the reform commission? It was Hallelujah, Hallelujah was in that meeting. Rigotto, Rigotto who became governor of Rio Grande do Sul, he was a dentist and knew the subject well. And on the other side, it was a meeting made up of three parts: 7 states in the Northeast, and I advised Secretary Edmilton Santos of the Tasso Jereissati government, I was there professionally. The Northeastern states, obviously, wanting fiscal war, and the State of São Paulo not wanting fiscal war. Then, a tax reform project was presented that was in the hands of dr. Everardo Maciel.
He took the project and started ticking item by item, then he turned ... ticking, ticking, ticking. It came to an end he had checked almost everything. He said: "Everything I wrote down, that I crossed out here, has no chance of passing".
Well, I have been following the reform projects since 1995. In some way or another, participating in debates or going to Senate commissions to make statements about them, in short, I study effectively. I stopped studying because I started to confuse what was in effect and what was not. But what I get from my experience is that the tax reform projects are supported by a legal, economic and political tripod.
All of these projects, most of them, at least, fell because the political side did not hold, it was not enough to sustain the structure. Not even this PEC 45, as Professor Hamilton demonstrated very well ... it has another support, it has some deficiencies that make it almost impossible to sustain it, it is very difficult to challenge the issue of the federal pact, the question of selectivity, a single rate. This causes an increase in the tax burden, especially for service providers, as demonstrated in your presentation here, of at least 500%.
In the society of dentists, not to mention lawyers, who are in the presumed profit and who pay 3,65% of PIS and Cofins, will have an increase to 25%. If then the ill-fated dividend tax comes, we will collect the tram and leave the country. Because you have no condition.
Well, we have the federal VAT proposal. That is, the creation, which is the proposal made by the government, which is the creation of a VAT that brings together IPI, PIS and Cofins. I have serious doubts about the constitutionality of this proposal, because nowadays we have revenues being taxed by two contributions: PIS and Cofins. And the IPI tax on industrialized products.
ICMS and ISS, they affect the value of the operation. Billing is nothing more than the sum of all the values of the operations carried out in a given period. And the Constitution says that residual jurisdiction can only be exercised if it is instituted by a complementary law, there is provision for non-cumulativity in relation to the new legislation and the new legislation does not have a calculation basis or generating facts proper to another tax. Not identical, proper. And billing, in my view, is for ICMS and ISS.
What if we do it for PEC? Is this rule a stone clause? Part of the doctrine says it is. I have doubts about constitutionality as it will turn two contributions into a tax. Contributions can have this calculation basis or taxable event characteristic of another tax, but not another tax. This is a mere reflection.
Taxation on financial transactions, by our dear secretary Marcos Cintra. Financial movements are perhaps the way to solve new technologies. You see that this is the alternative that is being adopted by other countries. Turnover tax, in short, they always try to catch the financial flow.
Because with new technologies I change the provider of services and goods, I change the receiver of these services and goods. They move in the world. I can't capture, define a state that is competent to tax them, but the financial flow continues to flow out of the buyer's pocket and into the seller's pocket. So, maybe this is a solution for new technologies.
Until the moment the cryptocurrency is working. Because as soon as it actually works and is legalized, it is no longer defined who is a seller or who is a buyer.
Occasional changes in the current system, that is, a fourth option. Which is the following: we will identify the problems and find solutions to the specific problems, in an infraconstitutional environment. Let's take the non-cumulative nature of ICMS, IPI, PIS and Cofins and we will try to resolve these issues. We will try to resolve the issue of tax benefits in an infraconstitutional way, without changing the Constitution. This is a fourth alternative.
And a fifth alternative, which I heard yesterday at a meeting I attended, by dr. Alberto Macedo, who is a city attorney, which I found interesting, that would be to mix this alternative (d), that in a previous moment, that is, to correct in a way, the rules that are infraconstitutional and that can, in some way, harm the State / taxpayer relationship and, having done that, then try to migrate to (a). That is, create an effective VAT.
I am not against VAT, I am not. On the contrary, I am in favor. Despite being a tribute of the last century, an outdated tribute, a tribute that also needs several and several adjustments in relation to new technologies, it is not a tax that is sufficient to tax this circulation of wealth, so much so that there is MOSS, the Mini One Stop Shop, which tries to concentrate in certain countries the collection of taxes that must be made to the various jurisdictions to which sales are made, but I think that, due to the fact that this is the tax that is in force in 165 other countries, we cannot be left out of this.
The investor, I repeat Schoueri yesterday, the investor doesn't like that. So, these are ... The prediction for the XNUMXst Century is that it is a complete impossibility to say something that is after noon tomorrow.
Question from Everardo Maciel to Gustavo Brigagão:
EVERARDO MACIEL: First of all, to thank Gustavo for the brilliant, but not surprising exposure, and I think to show you all that we had an exceptional afternoon listening to five of the most brilliant Brazilian tax lawyers in an interesting combination, each addressing very different aspects different, but all with the convergence of legal security.
A few small considerations. The OECD Secretary-General, when making that comment, he should pay credit to Benjamin Franklin, that the base is not his, it was Benjamin Franklin's. He was assuming it as his own.
What I think I would add is this: it was the death of taxes. You imagine. We are experiencing a degree of confusion of this kind in the world. This is absolutely true. It is not true because the tax went bad. The world has changed.
There is a spectacular change in the world. I mean, today we are dealing with, to use some phrases from an author that Hamilton and I liked a lot, which is Harari, Yuval Harari, we are dealing with attention merchants, where you are not getting information, you are the product. This is an absolutely incredible change in the world. So this incredible change in the world implies, therefore, that tax systems have to be completely rethought. What exists is a great perplexity. That is to say, all that has been heard about BEPS, the OECD, the European Union, is in fact that no one is managing to find a solution because the problem is not even formulated properly. Because it has not been clearly understood that a major change is taking place in the world.
That is the central issue. And you see, you didn't approach it, certainly because there wouldn't be that much time, that is, even the solutions that are being adopted in the United States. The adoption of some new taxes, such as BIT like GUILT, that is, seeking even some solutions that were ours. You heard Isaiah yesterday saying: “Look, now the Americans are adopting the solutions that Everardo put here in Brazil, that is, a long time ago”.
Is not it. There is strictly a huge perplexity and then when I talk about VAT and, as we already talked about, VAT is from 1949, that is, originally from Japan. And in one detail, it was not credit, tax against tax, it was a basis against base.
It was, therefore, a completely different model. There is a book that I think is exceptional that deals with this, which is Clara Sullivan's book, which I think maybe where I have the best record of everything that has existed in VAT throughout the world.
What I understand is this: we are discussing the 49th solution for the XNUMXst Century. That there is a problem it is obvious that there is. Everyone here pointed out many and I would even add some others that were not pointed out here, but that is not the case. Today I am not an exhibitor. But of course there are problems.
Now, what I think I have to deal with is this. Let's see how we solve these problems, in the meantime look at what is going on in the world to find a solution, not as we are thinking here, but as we did in 65. What did we do in 65? When VAT appeared, Brazil came out as a pioneer. I mean, after Japan's solution was extinguished and France adopted it, the first solution for an entire VAT was Brazil. Because France didn't have VAT until the end of retail, no. France interrupted.
I mean, that was a bold solution, it was an advanced solution for a world of production chain. There is no more productive chain. You have a network. So, therefore, look for a productive chain solution when you have a network? You mentioned examples here from Nutella, that's what. When we are talking about 3D printing, are you a producer or a consumer? You will definitely have to draw to say what it is. Or it is both.
But, finally, to say the following: Gustavo, I want to greet you, it was a brilliant exhibition. I think that here there are some very interesting elements for our reflection and this ends up integrating a book, as you may already know, it is important, all of this will serve for us to have something, some legacy for other people to see as well.
And in doing so, before closing, and I'm going to ask to close, I was going to ask dr. Victorio De Marchi did, I will give the floor to you.
GUSTAVO BRIGAGÃO: Regarding the issue of consumer participation in the relationships established with companies related to the digital economy, one of the issues that were discussed, both in the OECD and in the G20, and in the European Union, is to assign value to the data which are provided, because when we log into WhatsApp, for example, we do not pay anything to use the application, but we are obliged to provide our data, and this data is used by it and adds value to the company and, In fact, this raw material that we give, also free of charge, there is a kind of exchange, this raw material is what makes these companies earn that figure.
So, they mean the following: “Look, there is taxation here”. The fact that WhatsApp consumers are used. Understood. So, it gets to this level of discussion and it can evolve into that and end up being, there is taxation due to this interpretation.
Now, in relation to VAT, I agree, it is a tribute from the middle of the last century, it is a tribute that was also created for a reality completely different from the current one, but we are behind this.
I do not consider that the creation of IPI, ICMS (ICM yet) or ISS was something, except for this aspect that goes to retail, which is an improvement, but I do not consider that they are taxes. -cumulative. That is my point.
EVERARDO MACIEL: But if you allow me to ponder. On one occasion, Paulo Ayres Barreto told us that he asked our dear and late Alcides Jorge Costa: "Are you in favor of cumulative or non-cumulative tax?" And he, with that peculiar wisdom, said: “It depends on the rate, right? The rest is principlism. ”
GUSTAVO BRIGAGÃO: Yes, but this is about the tax burden that falls. My question is, late or not, the fact is that we have 168 countries that adopt VAT and we are different from those 168 countries. So, I think this is a problem with regard to foreign capital investment in the country. Understood. So, that's why I think, when I see the reviews, I agree with all of them.
But I think that we should eventually try to fight to try to somehow get around this and create an IVA, not in the way it is being created. Perfecting this a little, but I would very much like to be able to tell foreign investors that we have a form of taxation that is compatible with what they know. And today I can't say that, understand?