The Rural Territorial Tax (ITR) is a tax directly related to the emergence of the Brazilian Republic and its agrarian face. ITR was introduced in the country by the Constitution of the Republic of the United States of Brazil, in 1891, through its Article 9, which attributed jurisdiction over it to the federative states: “Article 9 – It is the sole responsibility of the States to establish taxes: 2) on Rural and Urban Properties[1].”
For the first time in Brazil’s history, taxes have gained constitutional status, allowing for greater institutionalization, extensive regulation, and transparency. Over the years, its collection and enforcement remained the responsibility of the states:
Constitution of the Republic of the United States of Brazil of 1934: “Article 8 – It is also the sole responsibility of the States: I – to establish taxes on: a) land property, except for urban property.”[2]
Constitution of the Republic of the United States of Brazil of 1937: “Article 23 – It is the sole responsibility of the States, except for the limitation established in Article 35, letter d: I – the decree of taxes on: a) land property, except for urban;”[3]
Constitution of the United States of Brazil of 1946: “Article 19. It is the responsibility of the States to establish taxes on: I – land property, except for urban property;”[4]
Constitutional Amendment No. 5 of 1961, in turn, transfers jurisdiction to the municipalities, being superseded only 3 years later, by Constitutional Amendment No. 10 of 1964, which sets forth that such jurisdiction should be attributed to the Federal Government.
The tax, until then purely fiscal, is reshaped by the advent of the 1964 Land Statute, aimed at regulating the rights and obligations relative to rural assets, with a view to implementing the Agrarian Reform, and furthering the Agricultural Policy. According to this statute, property would fully perform its social function when it is able to simultaneously[5]:
- a) further the wellness of owners and workers who work there, as well as their families;
- b) maintain satisfactory levels of productivity;
- c) ensure the conservation of natural resources;
- d) abide by the legal provisions that regulate fair labor relations between those who own it and cultivate it.
Bill No. 4504/1964 was unambiguously targeted at the use of the Rural Land Tax as a valuable instrument to fight unproductivity and redistribute expropriated land. To this end, the Statute introduced a number of guidelines for agrarian reform such as periodic plans and financing funds. After the 1979 reform, the law, in addition to establishing progressive rates according to the size of the taxed area, provided for the possibility of a reduction of up to 90% as a fiscal stimulus, according to the degree of economic use of the rural property, as follows[6]:
- a) reduction of up to 45%, by the degree of land use, measured by the ratio between the area actually used and the total usable area of the rural property;
- b) reduction of up to 45% by the degree of efficiency in the exploitation, measured by the ratio between the yield obtained per hectare for each product exploited and the relevant regional indices set by the Executive Branch and multiplied by the degree of land use, referred to in item “a” of this paragraph.
The vast extent of the country, however, caused the tax to undergo some changes in the 1988 Federal Constitution. Constitutional Amendment No. 42 of 2003 modified Articles 153 and 158 regarding the inspection and collection of ITR, and the total collected from the tax is the responsibility of the Municipalities that undertake such responsibilities. The distribution is then made by the Federal Revenue Service of Brazil through an agreement contingent on evidence by the Municipality of having an appropriate technological structure and staff of officials assigned to assess tax credits, to be approved in a civil-service examination[7].
The new Constitution also lent more weight to the extrafiscal character of the tax, establishing two distinct situations:
(1) Furtherance of the suitable and efficient use of rural territorial space, with Paragraph 4 of Article 153 establishing that the tax will be progressive and will have its rates set in such a way as to discourage unproductive properties; and
(2) Support for small landowners, insomuch as small rural farm modules, defined by law, are immune to the payment of ITR, when the owner who does not own another property exploits them.
Hence, the intent was to restrain the existence of unproductive latifundia, meanwhile warranting special and more favorable treatment to small rural producers. These are rules that seek to embody the social function of property and taxation vis-à-vis particular contributory capacities[8].
Lastly, in the current scenario of Rural Land Tax, Decree No. 4382/2002 thoroughly regulated the tax, defining aspects such as indirect taxpayers, levy, exemption, and immunity. The most complex and interesting point of the legal provision is, in turn, the definition of a non-taxable area, which allows the exclusion in the calculation of the property size of the areas deemed as[9]:
I – of permanent preservation – Forest Code, Articles 2 and 3.
II – of legal reserve
III – of private natural heritage reserve
IV – of conservation easement
V – of ecological interest for protection of ecosystems, as declared by an act of the competent federal or state agency, and that broaden the restrictions of use set forth in Items I and II of the head provision of this Article.
VI – proven useless for rural activity, declared of ecological interest by an act of the competent federal or state agency.
When reviewing the background of ITR, it is notorious how the tax, in addition to taxing rural areas, has a much greater purpose: to further rural production and reduce the country’s inequalities. Far from being a perfect model, with each legislative novation the tax improves in the pursuit of its purpose, aiming to foster the economic activity that is responsible for the largest share of the country’s GDP.
Available at: https://revistacultivar.com.br/artigos/imposto-territorial-rural-a-evolucao-do-tributo-republicano#:~:text=O%20Imposto%20Territorial%20Rural%20(ITR,aos%20estados%20federativos%3A%20%E2%80%9Cart.
[1] Constituição da República dos Estados Unidos do Brasil de 1891. Available at: https://www.planalto.gov.br/ccivil_03/constituicao/constituicao91.htm
[2] Constituição da República dos Estados Unidos do Brasil de 1934. Available at: https://www.planalto.gov.br/ccivil_03/constituicao/constituicao34.htm
[3] Constituição da República dos Estados Unidos do Brasil de 1937. Available at: https://www.planalto.gov.br/ccivil_03/constituicao/constituicao37.htm
[4] Original wording of the Constitution of the United States of Brazil of 1946. Available at: https://www2.camara.leg.br/legin/fed/consti/1940-1949/constituicao-1946-18-julho-1946-365199-publicacaooriginal-1-pl.html
[5]Article 2, Paragraph 2. Law 4504/1964 (Land Statute). Available at: https://www.planalto.gov.br/ccivil_03/leis/l4504.htm
[6]Article 50, Paragraph 5, ibid.
[7]Article 7, Normative Instruction No. 1640/16 of the Federal Revenue Service of Brazil. Available at: http://normas.receita.fazenda.gov.br/sijut2consulta/link.action?idAto=73816.
[8] LEÃO, Celina Gontijo e FRIAS, Lincoln. Revista Debate Econômico. As deficiências do Imposto Territorial Rural (ITR), v.4, n.2, Jul-Dec. 2016. P. 103.
[9]Article 10, Decree No. 4382/2002. Available at: https://www.planalto.gov.br/ccivil_03/decreto/2002/d4382.htm
Autor: Flávia Sant'Anna Benites • email: flavia@ernestoborges.com.br • Tel.: +55 67 99984 1406
