The climate of antagonism experienced between the tax administration and the taxpayer favors the maintenance of a conflict relationship between the two parties. The construction of a new paradigm presupposes reducing the distrust of the taxpayer in relation to the public power, as well as changing the perception of the tax authority in relation to the taxpayer.[1]

Well known for the high levels of litigation, tax litigation reflects a complex and bureaucratic tax system, which leaves the taxpayer subject to penalties and sanctions.

As an effect of this imbalance, the ineffectiveness of the conflict resolution system is observed, which results in excessive litigation in Brazilian tax system. Statistics pointed, already in 2019, a tax litigation (administrative and judicial, at the three federative levels) that exceeded the level of R$ 5.44 trillion – 75% of national GDP.

The use of preventive measures against tax litigation is an international trend, with emphasis on the use of tax transparency and compliance programs in favor of a less antagonistic relationship based on the paradigms of trust and collaboration. The cooperative tax compliance consists of fulfilling the main tax obligation (payment) through reciprocal cooperation between the state management and the taxpayer.[2]

The initiative to create a diploma for the protection of the taxpayer has already been adopted in countries such as the United States (Taxpayer Bill of Rights II) and Spain (Ley de Derechos y Garantias de los Contribuyentes), among others.

In early 2022, Brazil received the invitation letter from the Organization for Economic Cooperation and Development (OECD), with unanimous approval by the ambassadors of the 37 countries that make up the group, start the process of adhering to the organisation.

In addition, Brazil is a member of the OECD Forum on Tax Administration (FTA), whose main objective is to improve the performance of the tax administration in order to make it more efficient and effective and increase tax compliance, reducing costs for taxpayers and encouraging a cooperative environment based on mutual trust.

In the analysis of the current national tax system and the data related to the stock of cases in the administrative and judicial spheres, attention is drawn to the search for alternative ways of resolving disputes in tax matters and the establishment of a harmonious relationship between the parties that make up the legal-tax relationship.

It is being processed in the House of Representatives Complementary Bill 17/22 (PLP 17/22), authored by Mr Felipe Rigoni (União Brasil) together with 31 other parliamentarians. He proposes to establish the Taxpayer's Defense Code in Brazilian legislation. The content presents a set of rules, rights and duties to regulate the interaction between taxpayer and Brazilian Federal Revenue (Brazilian IRS) and curb abuses.

The original text of PLP 17/22 is structured in five chapters:

  • Preliminary provisions and definitions;
  • Fundamental standards;
  • The rights of the taxpayer;
  • The fences and duties of the Public Treasury; and
  • The final provisions.

The Taxpayer's Defense Code opens its text recognizing the asymmetry between taxpayer and Brazilian IRS and provides for fundamental norms, such as the protection of taxpayer's rights, especially contradictory and broad defense, in addition to the presumption of the good faith of the taxpayer in its interaction with the IRS.

Another important point brought by the PLP 17/22 is the indication of the assumptions and fundamentals of fact and law that determine decisions in administrative proceedings, under penalty of invalidity. This provision is established as a principle to be considered by the Brazilian IRS in the trial of cases under its competence, to bring greater legal certainty to the taxpayer in the course of administrative discussions.

In relation to the rights of the taxpayer and the prosecutors who represent him, we highlight the provision for compensation of property and moral damages of acts performed by public servants without strict observance of tax legislation and the impediment of seizure of assets as a coercive means for paying taxes.

PLP 17/22 also deals with old issues, but in wide discussion both in the judiciary and in the tax administration to this day. This is the case of the confiscatory effect of the tax fine, a matter of general repercussion pending trial in the Supreme Court.[3]

Specifically in article 11, item XVI, the PLP 17/22 expressly provides for the prohibition of the application of confiscatory pecuniary penalty that exceeds the amount of the tax due. The measure is in line with a frequently fought clash in tax litigation involving lawsuits against the IRS, which insists on applying heave-high penalties for infractions, even for those not qualified as simulation, fraud or collusion.

The legal diploma provides for protection of confiscatory acts that reach the taxpayer's assets resulting from the tax authorities' actions, as presented in the justification of the PLP 17/22:

"What is intended in these articles is the delimitation of guidelines for the imposition of taxes on the taxable person, according to the best jurisprudence and tax guidelines. Considering, also, the principles of free initiative and Business Freedom, we emphasize that the existence of judicial or extrajudicial proceedings in the face of taxpayers does not prevent the enjoyment of tax benefits and incentives and participation in bids, understanding that the taxpayer of the tax relationship cannot be deprived of the exercise of economic activity".

In this context, the legislative proposal includes prerogatives that aim to facilitate the taxpayer's access to the tax administration, such as the facilitated entry to the hierarchical superior of the business office where his case is being analyzed; immediate remission of any performance, ensuring the immediate exercise of defense; and appropriate and effective treatment in the division of the company.

The Taxpayer's Defense Code presents procedures that precede the beginning of the tax assessment, such as the prior issuance of notification for the beginning of inspection procedure and the analysis of the taxpayer's defense before the tax assessment.

The proposal also presents changes to end obstacles regularly faced by taxpayers by allowing the enjoyment of tax benefits even with the existence of tax proceedings (administrative or judicial) pending and the novation in case of adhering to tax installments, giving the taxpayer the state of delinquency.

The project provides for other practical measures that benefit the taxpayer, such as the sealing of the taxpayer's qualification as a sympathetic person responsible for mere presumption and the configuration of disregard of legal personality only by court decision.

The text also amends some rules provided for in the National Tax Code, with the reduction of the current limitation period of the tax credit collection action from five to three years. The same limitation period should be considered at the enforceable stage of locating the debtor's assets.

In relation to the Brazilian IRS, the project establishes several fences, including the use of police force in the steps in the taxpayer's establishment, except with judicial authorization. The text also conditions the purpose of criminal proceedings against the taxpayer for the commission of a crime against the tax order and the action of breach of confidentiality at the end of administrative proceedings that prove the taxpayer's tax irregularity.

The proposal brought by PLP 17/22 corroborates the need for change in the traditional form of the IRS, characterized by a limited dialogue with the taxpayer and the adoption of a repressive priority posture.

The tax compliance programs widely adopted in international experience evoke the deepening of the dialogue between tax authorities and taxpayers, increasing legal certainty as voluntary adaptation to tax legislation is promoted and the logic of the dispute is reversed.

In Brazil, states such as São Paulo, with "Nos Conformes"; Ceará, with the "Contribuinte Pai D'Égua"; and Rio Grande do Sul, with "Nos Conformes RS", already present compliance programs to establish an environment of reciprocal cooperation, aimed at guiding and serving taxpayers and stimulating the self-regularization of their tax status.

Measures such as the procedure for prior review of infringement notices are widely used in Spain and recommended by the OECD, demonstrating a reciprocal trust relationship between tax and taxpayer. According to the Administrative Litigation Diagnosis (2022),[4] some Brazilian states already adopt this same measure as a procedure to ensure greater legal consistency to the self. This is the case of the State of Minas Gerais, which avoids entering the tax litigation of tax requirements without being able to be confirmed by the trial bodies.

In this sense, the research highlights solutions adopted as preventive measures of tax litigation and covers the international experience in cooperative compliance as factors to reduce tax litigation. This shows that the exclusively punitive bias (or threat of imposition of sanction) has not proved sufficient to increase the taxpayers' compliance with current tax rules, causing conflicts that translate into high rates of tax litigation.

The construction of a cooperative tax regulation model should be studied and discussed to direct the state's action. The model should be established through the use of regulatory instruments and tax extrafiscality, as proposed in the international scenario.

The Taxpayer's Defense Code may be a path, even if not the only one, for the promotion of compliance, especially with regard to possible ways of implementing a model more based on collaboration and mutual trust between the tax administration and taxpayers.

PLP 17/22 is in the process awaiting a vote of the plenary of the House of Representatives. There has already been a public hearing to discuss the project. A substitute has been presented to the original text, which awaits approval.


[1] According to the Diagnosis of Tax Administrative Litigation (2022), perceptions brought by qualitative research, based on the responses of the administration s or their representatives, point to the existence of a mutual mistrust in the relationship between the child and taxpayers. There is, therefore, an opportunity to improve this relationship, to build a more preventive system that resolves conflicts.

[2] Co-operative compliance: a framework: from enhanced relationship to co-operative compliance. Paris: OECD Publishing, p. 14, 2013

[3] The theme returned to the agenda of the Supreme Court in February 2022, when it was recognized the general repercussion in Extraordinary Appeal 1,335,293, which will discuss on the merits the possibility of fixing punitive tax fine, unqualified, in an amount greater than 100% of the tax due (Theme 1,195).

[4] Brazilian Association of Jurimetry (ABJ). Administrative Tax Litigation Diagnostic Seminar. Brasilia, 2022. Fifty-five p.