The Great Fortunes Tax, or IGF, is a tax provided for in art. 153, item VII of the Federal Constitution of 1988. It is a tax of exclusive competence of the Federal Government, whose regulation or implementation has never been carried out. Despite the fact that the tax forecast in the country is already old, the debate that involves it gained new momentum in 2020, with the exacerbated expenditures that the state apparatus had with the Covid-19 pandemic. Seen by many as the saving hand, the Great Fortunes Tax is losing more and more space in the global scenario.
Several bills concerning the IGF are currently being processed in the National Congress. The various projects have in common the basis of their rapporteurs: the idea that Brazil, being one of the countries with more inequalities in the world, can find in the taxation of great fortunes a way of correcting social injustices, coupled with a new tax collection tool. However, despite the noble prospect, the solution to the problems listed is not found in the collection of the Great Fortunes Tax.
According to data collected by the Organization for Economic Cooperation and Development (ODCE) and analyzed by the Fiscal Policy Observatory[1] maintained by the Getúlio Vargas Foundation, of the 37 countries that make up the ODCE, 12 have already instituted the collection of the Great Fortunes Tax, namely: Austria, Germany, Denmark, Spain, Finland, France, Iceland, Luxembourg, Norway, Netherlands, Sweden and Switzerland. However, in 2020, only 3 kept the duty: Spain, Norway and Switzerland. The reasons that lead to giving up on the maintenance of the IGF are the most diverse and deserve to be analyzed in greater depth.
Beforehand, global experience demonstrates how taxation on fortunes represents a tiny portion of national tax revenues. Despite still maintaining the tax, the revenue from it represented 0.2% of Spain’s GDP in 2016[2], in relation to income from individual taxes on equity. In the same year, the tax analogous to the IGF in France represented less than 0.5% of the country’s total tax revenue[3].
In addition, the observation by ODCE [4] of the IGF revenue over 37 years (1980-2017) in countries such as Austria, Norway and Sweden showed that, even with the increase in national wealth, the revenue generated by the taxation of fortunes has consistently declined. Such results are mainly attributed to tax evasion and fraudulent asset statements, through the undervaluation of assets.
The increasing mobility of equity, together with the use of tax havens, combined with the development of information technology and the elimination of barriers to the transfer of capital between countries, allows taxpayers to manipulate their financial resources. Thus, another serious problem is brought up: capital flight. With an unstable political scenario and variable exchange rate policies, Brazil already does not present desirable characteristics for investments or for the maintenance of national investments. Moreover, the increase in the tax burden on the wealth of potential investors does not optimize the existing situation.
Still from the empirical experience of European countries, it is possible to extract an appreciative difficulty in the “fortunes”, with the consequent erosion of the tax calculation basis. Equally distressful is to identify IGF taxpayers: would the assets considered only belong to individuals, or would legal entities be equally taxed? Should the assets under consideration be concentrated in a single country, or can they be analyzed extraterritorially? Does the Public Administration have a functional system in order to avoid tax evasion?
Furthermore, in the Brazilian regulatory system, the IFG calculation basis finds new trials. As extracted from the caput of art. 5 of the aforementioned PLP 09/2019[5] reported by Danilo Cabral, the calculation basis for the Great Fortunes Tax would be: “The value of the set of assets and rights that make up the great fortune, minus the taxpayer’s pecuniary obligations, contained in their annual Individuals Income Tax return and documented proof”. Moving away from the focus of which criterion would be used to configure a “great” fortune, I emphasize that income is already used as a basis for calculating another one by an old acquaintance of Brazilians: the Income Tax. Also under Federal jurisdiction, the Income Tax is also levied, among others, on assets and rights, in addition to the income that accrues from them. Therefore, the occurrence of the bis in idem phenomenon is notorious, in which the same federative entity (Federal Government) taxes twice the same taxable event, in this case the property.
Far beyond the calculation basis, and the occurrence of bis in idem, the institution of the Great Fortunes Tax would also lead to the phenomenon of “double taxation”, whose occurrence is marked by taxation by two or more federative entities on the same taxable event. This is because, as the jurist Ives Gandra Martins teaches[6], the IGF is levied on assets and rights that have already undergone all previous taxation. For example, an individual who made a fortune through business activity is observed: for the maintenance and opening of their company, the taxpayer paid the Tax on Services and Urban Property Tax (IPTU) to the municipal entity, the Tax on Circulation of Goods and Services (ICMS) for the states, as well as the Social Contribution on Profit (CSLL) and the aforementioned Income Tax for the Federal Government.
Notwithstanding the foregoing, it is stated that understanding the arguments in favor of the regulation and consequent institution of the Great Fortunes Tax is fully possible, but impracticable. In addition to the challenges already faced by other countries, such as tax evasion, capital flight and numerous difficulties of monitoring by the Public Administration, the models presented so far in Bills that aim to regulate the IGF are incompatible with the Brazilian tax system. It can be noted, therefore, that even though it represents an easy solution to the problematic inequality in the country and a source of tax revenue to cover exorbitant expenses in the pandemic that is still ravaging the world, the in-depth analysis of the subject allows us to conclude that there is no easy solution.
*Flávia Sant’anna Benites, partner at Ernesto Borges Advogados, works in litigation and advisory, including the preparation of legal opinions, strategic analyzes (Special Regimes, Agreement Term), overviews of tax assets and liabilities, restitution of undue tax, defenses in tax assessments and other tax issues. Bachelor of Law from the Faculty of Law “Toledo Institution of Teaching of Presidente Prudente – State of São Paulo”. Specialization in Tax Law from the Brazilian Institute of Tax Studies – IBET. Postgraduate in Public Law from the School of Law of the Public Ministry.
[1] Mestrado Profissional em Comportamento do Consumidor. Taxa Rosa e a Construção do Gênero Feminino no Consumo, São Paulo, March 9, 2017. Available here. Accessed on: March 19, 2021.
João Pedro Loureiro Braga e Manoel Pires. Experiência internacional do Imposto sobre Grandes Fortunas na OCDE, Rio de Janeiro, April 17, 2020. Available at: https://observatorio-politica-fiscal.ibre.fgv.br/posts/experiencia-internacional-do-imposto-sobre-grandes-fortunas-na-ocde. Accessed on: April 27, 2021.
[2] OECD Tax Policy Studies. The Role and Design of Net Wealth Taxes in the OECD, Paris, France, 2018. Available at: https://read.oecd-ilibrary.org/taxation/the-role-and-design-of-net-wealth-taxes-in-the-oecd_9789264290303-en#page20. Accessed on: April 27, 2021.
[3] OECD Tax Policy Studies, op cit., p. 21.
[4]OECD Tax Policy Studies, op cit., p. 21.
[5] Danilo Cabral. Projeto de Lei Complementar 09/2019, Brasília, February 4, 2019. Available at: https://www.camara.leg.br/proposicoesWeb/prop_mostrarintegra?codteor=1727625#:~:text=2%C2%B0%20A%20base%20de,Art. Accessed on: April 27, 2021.
[6] Rádio Câmara. A desigualdade tributária e o Imposto sobre Grandes Fortunas, Brasília, July 30, 2015. Available at: https://www.camara.leg.br/radio/programas/463260-a-desigualdade-tributaria-e-o-imposto-sobre-grandes-fortunas/. Accessed on: April 27, 2021.
Available at: https://www.migalhas.com.br/depeso/346221/imposto-sobre-grandes-fortunas-os-desafios-por-ele-trazidos
Autor: Flávia Sant'Anna Benites • email: flavia@ernestoborges.com.br • Tel.: +55 67 99984 1406
