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Tax reform in Brazil: An analysis from the perspective of modernizing the tax system

RC: 150008
235 Readings
5/5 - (7 votes)
DOI: 10.32749/



TORREÃO, André D Albuquerque [1], DENDASCK, Carla Viana [2]

TORREÃO, André D Albuquerque. DENDASCK, Carla Viana. Tax reform in Brazil: An analysis from the perspective of modernizing the tax system. Revista Científica Multidisciplinar Núcleo do Conhecimento. Year 06, Ed. 11, Vol. 09, pp. 88-98. November 2021. ISSN: 2448-0959, Access Link:, DOI: 10.32749/


This article aims to reflect on tax reform in Brazil from the perspective of seeking modernization of the tax system. The methodology used was a literature review, which was responsible for supporting and providing foundations for a connection between the search for solutions to issues related to tax reform and the perspective of modernization of public spheres. In conclusion, it was observed that this theme still requires in-depth investigation as its challenges become increasingly complex.

Keywords: Tax reform, Modernization, Tax System.


The Brazilian tax system is one of the most complex in the world. Its structure is globally known for being extensive and intricate, both in tax calculation and its tax burden. Therefore, understanding its functioning and knowing the laws and regulations governing it is a challenge.

In current discussions on tax reform, there is a convergent point: the simplification of the tax system. The legislation is so extensive and diversified that it creates legal uncertainty for both legal entities and individuals, making it a major concern in this matter. The focus of tax reform should be the modernization and simplification of taxation for effective economic growth.

However, despite the urgent need for tax system changes, one must consider the extent and scope of these reform proposals so that the discourse does not become mere rhetoric. In the House, there is the PEC 45/19; in the Senate, the PEC 110/19; and the federal government has presented PL 3.887/2020. None of them have provided a study of sectoral impacts, impacts on prices, or even engaged in a fruitful dialogue between the government and taxpayers. The proposals aim for simplification, but studies indicate a potential increase in prices for the end consumer.


PEC 45/2019, presented in the Chamber of Deputies, proposes to institute the Tax on Goods and Services (IBS), replacing IPI, PIS, COFINS, ICMS, and ISS, as well as the selective tax for cigarettes and beverages (IS). It envisions that the IBS will have federal competence and be defined by a complementary law. It will be composed of three sub-rates: federal, state, and municipal, which together will form a single rate.

PEC 110/2019 also proposes the extinction of some taxes and the creation of two new ones. In this case, the IBS will replace the following taxes: IPI, IOF, PIS, PASEP, COFINS, CIDE – Fuel, Education Payroll, ICMS, and ISS. It will also create IS (selective tax), the tax on luxurious goods and services. In this proposal, the tax will be state-level and created through the Federal Congress, with the basic participation of municipal and state entities. The IBS rate will be defined by a complementary law, with a standard rate.

The proposal from the Federal Government, presented in 2020, PL 3.887/2020, outlined a tax reform to be carried out in four phases. The first, already presented, is the unification of PIS, PASEP, and COFINS on goods and services transactions, known as CBS. The rate would be 12% for all operations regardless of economic activity, except for financial institutions, subject to a 5.8% rate.

A quick explanation about the process of proposals and the legal instruments used to modify constitutional rules: a bill (PL) is a plan to create a new law or amend an existing one; the text can be presented by any congressman or senator, chamber committee, president, attorney general, higher courts, and even citizens. The PEC is a Proposal for a Constitutional Amendment, which is a rule to be rectified or added to the existing law. In other words, it updates a text present in the Constitution.

To propose a PEC, it can be done by the President of the Republic, at least one-third of federal deputies or senators, and more than half of the legislative assemblies of the states. It’s worth noting that a proposal for a constitutional amendment cannot address the federal form, voting, separation of powers, and individual rights and guarantees.


It is evident that we do not have a real tax reform proposal. All suggested ones are very similar. None of them addresses the true problems of the Brazilian tax system: none reduces the tax burden, there is no mention of ancillary obligations, because we are only dealing with the simplification aspect, which is a convergent point for all interested parties. What is crucial in this scenario is that political entities want a tax reform to collect more revenue due to the high cost of public expenses.

Therefore, a critical point of the presented Reform proposals is that they violate the federative pact. This is because the proposals offer the creation of a single tax and, thus, take away the autonomy of states and municipalities to manage their budgets, without respecting the principles of equality and contributory capacity. This is because all goods and services will be taxed equally.

It is important to highlight that our constitutional system is well organized, even though some constitutional tax repair may be needed. However, in the tax reform proposals, a series of formal issues are being treated casually, such as the case of constitutional clauses. These clauses are exceptions when seeking proposals for amendment to the Constitution, as they are the fundamental bases that establish the Federative Republic of Brazil, namely: the federative form of the State, voting, separation of powers, and individual rights and guarantees. It is necessary to make this explanation so that Brazilian citizens have a greater understanding of the proposals presented. This is because, by trivializing the Constitutional order, there is a weakening of democracy and constitutional rights.

In a country with significant socioeconomic inequality among states and municipalities, Brazil must take into consideration in its tax reform institutes that bring about a real change in how to tax, modifying the excessive tax burden, reducing bureaucratic requirements, and seeking equity in taxation. Furthermore, it is observed that Brazil has the highest economic disparity and there is no real proposal for change that interferes and brings about a reduction in consumption, income, and wealth taxation.

The proposals we refer to also did not even mention a proposal for the regulation of the tax on large fortunes. The projects merely present a pseudo-demonstration of streamlining the tax system, which appears to be destined to be as complex as the current one and, consequently, will only bring about an increase in revenue. It should be taken into consideration that there is no effective study of the proposals presented.

However, for the construction of a fairer and more solidary society, the tax system must be guided by taxation that takes into account the economic capacity of taxpayers, taxing those who have a greater capacity to contribute so that they bear the cost of public services fairly. Similarly, such services can be more effective, bringing the expected return to society, especially regarding the poorest.

In this context, the systemic problems of Brazilian taxation are addressed, giving rise to the tax burden. It is common to hear that Brazil’s tax burden is high. This perception is due to various cases of corruption and mismanagement of public resources.

Considering the budget deficit situation faced by Brazil in recent years, a reduction in the tax burden in the short term is ruled out. This is because such a measure would not address the current situation but would only put the country in a worse situation than it is experiencing today, causing a budget imbalance that would affect key expenses such as health, education, and even the payment of salaries to public servants. However, if there is no possibility of reducing the tax burden at this time, fiscal adjustment should be made according to the individual’s contributory capacity.

This imposition should be carried out because, the greater the wealth, the less impact taxation has. In a concise analysis, it is evident that, of all the taxes created, none is capable of taking into account the individual economic capacity of taxpayers. Therefore, there is a clear need for a tax reform that addresses the needs of Brazil. The current President of Brazil made tax reform a campaign landmark, ensuring a reduction and simplification of the tax system. However, the proposed reform is not in line with the campaign promises and also violates Constitutional principles and the legal nature of the tax system.

In addition to the complex tax system and its strong economic impact, we are experiencing the economic impacts of Covid-19. The health crisis has affected the global economy, imposed social isolation, and immediately impacted production and consumption, leaving everyone powerless about the recovery period and affecting the long-term trajectory of the economy.


It is known that the fundamental basis for an efficient taxation should be included in the ideal tax reform, focusing on collection mechanisms, equity, costs, incidences, and combating tax evasion as a priority in the debate.

Regarding the proposed tax reforms, questions arise about changes in the national tax system, the real impacts on our economy, and whether these proposals align with constitutional principles such as equality, contributory capacity, seeking equity, and social justice.

The author Hugo Machado de Brito, cited by Schoeuri (2015), emphasizes the minimal use of the term proportionality because, in tax law, the criterion of proportionality lies in the use of economic capacity. This explains why the 1988 constituent used not only the principle of equality but also the principle of economic capacity in its text.

Therefore, a more in-depth evaluation of instruments that allow for an expansion of citizens’ participation in the process of constructing solutions to state conflicts is essential. Taxing by the classic concept no longer makes sense. A study of contributory capacity is necessary, taking into account not only income but also the manifestation of wealth objectively. In other words, those who have the ability to possess more have the ability to contribute more.

Hence, the introduction of new concepts in tax matters, such as discretionality, the decision-making power of the public entity, shared with the citizen, who should be socially participative, is indispensable. However, in the process of formulating proposals presented as solutions to the new challenges of taxation, only public interests have been considered. Nevertheless, the interest of the common good must be contextualized. The principle of tax equality, provided for in Article 150, item II of the Federal Constitution, prohibits unequal treatment among taxpayers.

Author Luiz Eduardo Schoueri (2015) argues that, in tax matters, the constitutional text does not require equal treatment for people in similar situations. However, what is considered is taxpayers in equivalent situations. It is understood that the constituent recognized that equality will always be relative, making us reflect that the legislator must apply the principles, based on the analogy of economic criteria for those taxpayers who are not in an equivalent situation.

A reform of this importance must have its details fully disclosed and known to all economic agents. Furthermore, its final configuration must be based on detailed impact studies, prepared by both the private sector, but especially by the public sector, and subject to the scrutiny of all sectors of Brazilian society.

According to an article published in the Jornal da Paraíba by jurist Daniel Duarte (2021), tax reform must be linked to contributory capacity and social justice. However, the revenue collection policy adopts the sole objective of tax efficiency to meet public spending, which poses a significant problem as it leads tax activities along paths that prioritize easier tax collection at the expense of using modalities that hinder the proper application of the principle of contributory capacity and impose a high cost on taxpayers.

The pursuit of tax unification is a reproduction of something outdated: the VAT (value-added tax), the European single tax. The proposed reforms currently running in Congress can no longer keep up with basic modernity issues. This is because digital transactions have shattered tax paradigms, leading to questions about where profits should be taxed. Taxing by the classic concept no longer makes sense.

Therefore, a more in-depth evaluation of instruments that allow for an expansion of citizens’ participation in the constructive process of solutions to state conflicts is essential. A study of contributory capacity is necessary, taking into account not only income but also the manifestation of wealth objectively. In other words, those who have the ability to possess more have the ability to contribute more.

It is important to note that Brazilian society harbors negative feelings of rejection towards tax laws since the impositions always fall on the taxpayer, both in terms of cost and responsibility, in addition to their constant changes. When it comes to the legal-tax relationship between the parties, on one side, there are citizens hesitant to cooperate financially with the State, assuming that they are not efficiently served; and on the other, there is the Administration, which starts from the mistaken premise that the majority of citizens want to circumvent tax obligations. Thus, it is a relationship based on a lack of cooperation and a spirit of mutual participation, leading to an atmosphere of mutual, dominant, and archaic distrust.

Some Brazilian scholars understand that the tax system is, above all, a set of taxes that are responsible for raising funds to finance activities within the State’s competence, such as education, health, security, housing, basic sanitation, infrastructure, culture, among others (MARANHÃO, 2009). The Brazilian tax system is considered an incongruent and ineffective system. The fact is that it is challenging to find a logical coherence, based on theoretical foundations, justifying a tax structure like the current one. Changing this is not a simple task and depends on political and federative agreements, but a good starting point is to update the diagnosis of the problems that need to be addressed and the alternative solutions available in the light of economic theory and international experiences.

According to Meireles (2011), rules of a tax system that guide a straightforward and adjusted tax reform should be identified, systematizing the various existing options and opinions to delineate from which point the technical-economic judgment ends and political and social choices begin. Similarly, it is intended to compare a prototype of an ideal system with the deformities of the existing tax structure, additionally bringing the concern that it be a system capable of supporting economic and social growth policies. From these perspectives, some guidelines for a tax reform proposal in Brazil can be derived, with the intention of guiding public conduct on this issue. Thus, two paths can be considered: a first one, where it would be done energetically but more challenging to implement, and a second one, which would be a gradual process of change.

According to Varsano (2014, cited by ORAIR and GOBETTI, 2018), changes made in an orderly phased manner tend to incur errors and not follow the intended purpose. However, it is understood that when a phased reform is envisioned, there is an implicit existence of a certain outline of a tax system that one intends to achieve in the future, with the phased implementation facilitating the transition and allowing for some corrections along the way. Nevertheless, the most important aspect is that there be a point of convergence, bringing the structure of an effective tax system closer to the needs of the State and the taxpayer, so that the various points discussed fit appropriately, and unnecessary distortions are eliminated.


In addition to the existing economic challenges in the country, the various issues brought by Covid-19 have affected human life in general. Thus, the impacts brought about by the social isolation imposed by the pandemic, which certainly affect the economy, and it is known that the deleterious effects on the economy can persist beyond the resolution of the health crisis. It can be concluded that the more the population understands that the goal is common to all, namely overcoming the crisis with a mindset of common interest, the better the responses will be for health and the economy.

According to Young; Mathias (2020), the current scenario of the Covid-19 pandemic will require an organized effort among the world’s major economies. However, the greatest demand will be on the economic policy managers of each country, seeking new solutions for the current scenario of abnormalities. If there is no innovation, it is undeniable that the results will be paralyzing and catastrophic. But, if alternatives that propose a response to the unique nature of the effects of this pandemic are prioritized, challenging the most entrenched dogmas and convictions and proposing a union to eradicate the effects of this pandemic, perhaps the recovery will come more quickly. Previous crises have been experienced with serious problems on the demand side; the current crisis challenges us as it points to problems on both the demand and supply sides, in addition to the integration of public health for the proposed solution. Moreover, we are going through a historical period of generating more innovations with new perspectives, redesigning the relationships between society and economists.

The modern economy presents significant challenges that can be seen when its interpreters and operators are faced with the need to question and recreate concepts forged under the view of the old economy. The tax system does not escape this realization. This is what happens when discussing taxation and its reforms, and the current circumstance imposed on the world economy by Covid-19 are issues that must be studied and discussed for the better development of the country, bringing economic growth and an elevation to the level of social equality.


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SCHOUERI, Luís Eduardo. Normas tributárias indutoras e intervenção econômica. São Paulo: Renovar, 2015.

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DUARTE, Daniel Thadeu Moura. Tributação sobre consumo: tributação, capacidade contributiva e justiça social. Disponível em: <>. Acesso em: 22 jan. 2021.

MARANHÃO, Eduardo Torres de Albuquerque. Análise crítica do Sistema Tributário Nacional e sugestões para o seu aperfeiçoamento. JUS, 1 ago. 2010. Disponível em: <>. Acesso em: 07 ago. 2020.

MEIRELES, James et al. Taxby Design. Oxford: Oxford UniversityPress , 2011. Disponível em: <>. Acesso em: 24 jul. 2020.

ORAIR, Rodrigo; GOBETTI, Sérgio. Reforma Tributária no Brasil: princípios norteadores e propostas em debate. SciELOAnalytics, 2018. Disponível em: <>. Acesso em: 7 ago. 2020.

YOUNG, Carlos Eduardo Frickmann; MATHIAS, João Felippe Cury M. (Orgs.). COVID 19: meio ambiente & políticas públicas. São Paulo: HUCITEC, 2020.

[1] Graduated in Law from Unipê College. Specialization in Constitutional and Administrative Law from Uniamérica.

[2] PhD in Psychology and Clinical Psychoanalysis. Currently pursuing a PhD in Communication and Semiotics at Pontifical Catholic University of São Paulo (PUC/SP). Master’s degree in Religious Sciences from Mackenzie Presbyterian University. Master’s degree in Clinical Psychoanalysis. Bachelor’s degree in Biological Sciences. Bachelor’s degree in Theology. With over 15 years of experience in Scientific Methodology (Research Method) guiding the Scientific Production of Master’s and PhD candidates. Specialized in Market Research and Research in the Health field. ORCID: 0000-0003-2952-4337. Currículo Lattes:

Submitted: November 2021.

Approved: November 2021.

5/5 - (7 votes)
Carla Dendasck

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