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International trade always have been an issue between nations. As each trading country has its own interests, granting a free and equal trading environment can be understood as the "great milestone" to be pursued in order to give the particulars from trading countries the same rights and protections. The GATT/WTO rules are a development of such milestone, establishing and developing the grounds to help trade flow as freely as possible.

The WTO/GATT agreements are meant to be binding contracts between signing trading nations, forcing the governments to keep the trading policies of its country within the established limits. However, Binding a government to keep such policies depends on the political structure such government has. An agreement as GATT/WTO is only effective when the signing nation has the means and power to enforce, in its own territory, what was agreed.

Countries such as Brazil have political thresholds that refrains the full applicability of trading agreements such as GATT/WTO. As a federation, Brazilian Federal Constitution granted the States specific taxing powers that cannot (in a certain way) be interfered by the Federal Government laws and policies.

The value-added State tax (ICMS), which is levied on the commercial trade transactions (and imports also) is part of this discussion. As the Brazilian legislation determined that ICMS should be ruled by the States, one can say that the Federal Government is not allowed to put restrictions or establish policies in order to rule such taxes.

The main discussion is so established - from one side there is the Brazilian National Government signing GATT/WTO agreements, defining policies such as the non-discrimination rule; on the other side there is the Federal Constitution and lower rules granting the States (that may not agree with the rules set forth by GATT) taxing powers related ICMS.

In this article we intend to demonstrate how the domestic legislation (and the interpretation given to it by the domestic courts) can hinder the application in its completeness of the non-discrimination principle.

GATT is the result of several discussions between the signing countries being the later agreement dated of 1994. This international agreement aims at regulating the commercial trades between the signing parties, trying to reduce the use of protection practices.

Article III items 1, 2 and 4 of GATT establishes that there shall not be differentiated treatment between imported or domestic goods, in order to put both products on an equality level (in what concerns taxation):

1. The contracting parties recognize that internal taxes and other internal charges, and laws, regulations and requirements affecting the internal sale, offering for sale, purchase, transportation, distribution or use of products, and internal quantitative regulations requiring the mixture, processing or use of products in specified amounts or proportions, should not be applied to imported or domestic products so as to afford protection to domestic production.*

2. The products of the territory of any contracting party imported into the territory of any other contracting party shall not be subject, directly or indirectly, to internal taxes or other internal charges of any kind in excess of those applied, directly or indirectly, to like domestic products. Moreover, no contracting party shall otherwise apply internal taxes or other internal charges to imported or domestic products in a manner contrary to the principles set forth in paragraph 1.*


4. The products of the territory of any contracting party imported into the territory of any other contracting party shall be accorded treatment no less favorable than that accorded to like products of national origin in respect of all laws, regulations and requirements affecting their internal sale, offering for sale, purchase, transportation, distribution or use. The provisions of this paragraph shall not prevent the application of differential internal transportation charges which are based exclusively on the economic operation of the means of transport and not on the nationality of the product.


GATT excludes the existence of internal measures that the contracting parties could use in order to discriminate foreign goods (originating from other contracting party). Among these measures are taxes or any other excise charges that are higher than the ones applied directly or indirectly to the similar domestic products. Following this concept, the treatment given to imported goods shall not be less favorable than the one given to the domestic one.

Although Brazil is a GATT contracting nation, due to peculiarities of its tax system, the non-discrimination principle is not directly applicable. This is so because according to Brazil’s tax legislation, different Federation members are granted with different taxing powers.

The Brazilian Tax System is based on the civil law and the main rules of such system are established in the Brazilian Constitution and in the Brazilian Tax Code. The Brazilian Constitution establishes which taxes are under the authority of each Federation member and the events of applicability as well as the tax exemptions, the limits to the authority to tax and the most relevant principles guiding the Brazilian Tax System.

According to the taxing authorities assigned in the Brazilian Constitution, the taxes may be levied by any of the Federation members. In the case of the state taxes, as a rule, there is a National Law providing for the general rules to assess each tax. With due regard to the general rules, however, each State is authorized to regulate in its territory the assessment of the taxes under its authority.

On the State level a specific tax shall be analyzed. The ICMS is a State tax imposed on transactions involving the acquisition and later sale transaction with goods, being also levied on import transactions.

Brazilian national rules, more specifically article 98 of the National Tax Code sets forth the possibility of international conventions and treaties modifying the domestic tax legislation, determining that any new legislation shall observe the international documents and agreements.

Although it is possible to say that all the Brazilian States are subject to the National Laws being the GATT considered, under the Brazilian legislation, as a National Law, the ICMS imposition is ruled, at the end of the day, by each State, according to its specific legislation.

As the Brazilian taxation rules establishes taxing powers to different entities of the federation, it has been discussed through the years the possibility of the Federal Government, acting as a legal entity under the international law, obliging States and Municipalities to follow international rules and agreements entered into and by the country, especially those rules that governs the concession of certain tax benefits and conditions that would not be pursued if the agreement was not signed by the country.

This discussion takes even more relevance if it is analyzed together with the express gag rule (Section 151, Item III of Federal Constitution) that hinderers the Federal Government to grant exemptions of taxes that are not of its taxing powers, such as ICMS.

Part of Brazilian scholars[1] is of the opinion that the Federal Government, when entering into those international agreements, would be acting as a "Federation Government", a national legal entity, non-divisible and unique, superior to partial legal orders, and not as a "Central Government", partially decentralized, in which the States and the Municipalities have isonomic independence[2]. According to this line of thought, the Federal Government would not be subject to the gag rule of Section 151, III abovementioned.

Another part of Brazilian scholars[3]is favorable to the submission of State and Municipal taxes to the rules set forth by GATT. However, this part of the scholars takes into consideration another bedrock. Such scholars understand that, when signing international agreements, the Federal Government is not dealing with rules that are in conflict with the domestic rules.

Acting on behalf of the National Federation, when dealing with the extension to the foreign products of an exemption granted by the domestic law of a certain state, the Federal Government is not extending an exemption, but rather declaring the non-levy of the tax in such situation.

There is also another part of the scholars[4] who understands that the Federal Government would in fact be subject to the restriction set forth by Section 151, III, reason why it would be hindered of granting certain tax treatment to foreign products, even if it signed an international agreement such as GATT.

The Federal Supreme Court ("STF") already applied the first scholar’s stream. Such court already understood that treaties and international agreements would not be conflicting with the rule set forth by Section 151, III of the Federal Constitution, reason why differentiated tax treatment to be extended to transactions with foreign goods in light of international agreements, even in ICMS cases, are valid rules according to the Brazilian legal system.

In the same reasoning the Superior Court of Justice (“STJ”) enacted the Binding Rule n. 71, related to the import transaction with cod fish, a product that has a similar domestic one. According to such Binding Rule, the tax treatment given to the domestic product should be extended to the foreign one, as GATT rules would be sufficient to extend the exemption granted by the States (when ruling ICMS matters).

Adopting the understanding of both STF and STJ, GATT rules would be valid on the national legal system, being also applicable to taxes that would not be encompassed on the taxing power of the Federal Government (entity that negotiated and signed such international agreement).

It shall now be analyzed how both courts apply such understanding in cases involving the ICMS taxation, trying to avoid differentiated tax treatments between domestic and foreign products.

As previously mentioned, the ICMS is a tax levied on the commercialization of goods, on both acquisition and sale transactions. The transactions subject to the ICMS tax can occur between legal entities based on the same State (intrastate transactions) and between legal entities based on different States (interstate transactions). Additionally, according to the Federal Constitution, the import transaction (that involves the acquisition of a certain product by a Brazilian legal entity) is also subject to such tax.

Not going into too much detail, the States understand that the ICMS imposition is linked with the physical circulation of goods. This is to say that on every remittance or receipt of a certain good, the ICMS is imposed. Considering this concept, and with the brief explanation of the ICMS imposition on the preceding paragraph, the import transaction (receipt of a foreign good by a Brazilian legal entity) is equivalent to a domestic transaction (receipt one). Domestic transactions, on the other hand, are considered before the national legislation as remittance transactions. Therefore, considering that there is a difference between both transactions (i.e., one dealing with the receipt of goods, the other one with the remittance of goods), one shall question the applicability of a certain benefit granted to remittance transactions to the import one (receipt transaction).

Some States are of the opinion that, as the import transaction is equivalent to a receipt transaction, it shall not be benefited to the tax treatment granted to intrastate remittance transactions. Therefore, any tax benefit granted only to intrastate remittance transactions would not be extendable to the import transactions (in this line of thought, the non-discrimination principle would not apply, as the transactions are different).

STJ already positioned itself against this argument. On 2000, when analyzing a case where the extension of certain benefits were being questioned to imported seeds[5], the second panel of the court understood that the benefits granted to intrastate remittance transactions with domestic seeds should be extended to the import transactions, if the requesting legal entity complied with certain requirements. In that particular case, although the rationale behind the application of the extension of benefits to the imported goods was the one mentioned, the legal entity could not present enough evidences to comply with the requirements, reason why in that particular case the extension was not granted.

However, the grounds used by the court to analyze the case were clearly presented, in a way that, if the legal entity had enough evidence to show the compliance with the requisites set forth therein, the extension of the benefit would be granted.

On 2005, the first panel of the court extended an exemption granted by the Legislation of the State of Rio Grande do Sul to milk imported from Uruguai[6]. On that opportunity the court understood that the exemption benefit granted to the intrastate remittance transaction should be extended to the import transaction. Although analyzing the Assuncion Treaty, it also analyzed the non-discrimination principle, such as the one from GATT. It shall be noted that on this particular case it was mentioned that the exemption given to the domestic product was not conditioned (i.e., the remitting legal entity should not comply with any condition set forth by the legislation). This brings to the attention the fact that the analysis of the conditions surrounding both transactions was also taken into consideration by the courts (i.e., only giving the same treatment to transactions with equivalent products).

Finally, on 2007 STJ analyzed an important case[7] dealing with the non-discrimination principle also extending the benefit granted to intrastate remittance transactions to import transactions of the same products, applying GATT’s rationale.

STF has the understanding that the discussions above are related to the applicability of non-constitutional rules (not dealing with constitutional matters, which are of the competence of such court)[8]. However, it shall be noted that in the 1970ies[9] STF enacted a Binding Rule establishing that benefits granted to domestic products should be extended to imported ones.

Therefore, it is possible to identify that, on the Judicial System, in virtue of the non-discrimination principle set forth by GATT or other international agreements, the transactions with imported goods shall receive the same tax treatment granted to the domestic transactions, regardless of how such transactions are treated domestically (if of receipt or remittance transactions).


The Brazilian tax system is peculiar, as it grants different Federation entities taxing powers, hindering the Federal Government to grant exemptions of certain taxes, as such taxes are not of its competence. However, only the Federal Government is the political competent entity to sign international agreements, such as GATT/WTO ones.

Therefore, the main discussion when dealing with international treaties or agreements is the possibility of the Federal Government bearing certain obligations that would not be of its competence (such as the extension of ICMS tax benefits granted to domestic products to imported ones).

As it was presented, this is not a settled issue, with three different types of argument used by the scholars to support three different conclusions.

The Judicial courts, when analyzing the possible arguments, tends to adopt a broader approach, granting the Federal Government with enough power to rule certain taxation issues. Adopting such understanding, the courts understand that the Federal Government, when entering into those international agreements, would be acting as a "Federation Government", a national legal entity, non-divisible and unique, reason why, when signing a particular international document, would act on behalf of all the entities comprising the Federation.

Assuming such approach as correct, the courts have the understanding that GATT rules should also govern how the States shall grant benefits (or, at least, the possibility to extend such benefits to imported products).

Therefore, the GATT non-discrimination principle has been being applied. However, from all the above, such principle is not an end in itself. This is so because it does not depend only on the negotiations between the contracting parties, but also on the legal system of a contracting country, how the courts of such country understand the validity of the international agreements, how the courts apply the non-discrimination principle to specific cases, etc..

Note that the problem itself encounters political barriers, considering that it is a result of a Federation organization problem. Once Brazil had clear stipulations on both the constitution and National Legislation, problems like the applicability of GATT/WTO non-discrimination principle to taxes such as ICMS would be solved, with no need of scholars and court interpretation.

In sum: what was intended to give legal certainty to the commercial companies of all the contracting parties (of GATT) brings, to the specific case, more legal discussions than the ones that led to the international agreement that was negotiated.


[1]Hans Kelsen, Pontes de Miranda and Sacha Calmon Navarro

[2]Aliomar Baleeiro and Misabel Abreu Machado Derzi.

[3]Luís Eduardo Schoueri.

[4]Geraldo Ataliba, Aires Barreto, Agustín Gordillo and Misabel Abreu Machado Derzi.

[5]REsp 151.687/RS - 22/08/2000.

[6]REsp 480.563/RS - 06/09/2005.

[7]REsp nº 696.713/RS - 27/06/2007.

[8]AgR no AI 845.360/BA - 02/08/2011; RE605.695/SP - 05/10/2010; AgR no AI 714.039/PE - 09/10/2009; AgR.no AI 708.736-6/RJ -  21/10/2008; AgR no RE 298.779 - 01/08/2008 and AgR no AI 480.176 - 18/11/2005.

[9]Time in which the STF could express its opinion on certain cases.

(International Bar Association - IBA - 16.10.2015)

(Notícia na íntegra)