Thought leadership from our experts

Brazil, world champion in fiscal bureaucracy

According to a study published by the Brazilian Institute for Tax Planning (IBPT), the tax burden on the Gross Domestic Product (GDP) went, in 2014, from 35.04 per cent to 35.42 per cent. For the sake of curiosity, this same study identified that, in the 4 years of President Dilma Rousseff's first term, the tax burden has increased to 1.66 percentage point, against 1.41 percentage point of President Lula's eight-year term, and 3.75 percentage points of Fernando Henrique Cardoso's eight-year government.

As if this practice of charging confiscatory taxes to achieve the goal established by the Federal Government – the so-called "overtaxing" – was not enough, the Federal, State and Municipal authorities impose, on taxpayers and liable parties, high costs to comply with the corresponding ancillary (instrumental) obligations.

A survey published by PricewaterhouseCoopers in 2009 revealed that, in Brazil, 2,600 hours are spent to pay taxes or, more specifically, to comply with all the corresponding ancillary obligations, which is why, among 183 countries, Brazil occupies the first place in the ranking of the time spent with taxes.

It is noteworthy that this study was conducted in 2009, which means that, currently, it is likely that more hours are required to comply with the ancillary tax obligations, especially because a new, more sophisticated and complex obligation was created.

The daily avalanche of rules imposing new ancillary obligations is quite disturbing and generates, in addition to outrage and high costs, the following questions: all this confusing array of ancillary obligations is really necessary? What are so many tax liabilities created for?

To illustrate how much the accessory obligations are dysfunctional, we can cite numerous examples, such as the requirement made by most States, including São Paulo, that the State Value-Added Tax (ICMS) Information and Calculation Form (GIA ) be presented on a monthly basis. Since the implementation of the Public Digital Bookkeeping System (SPED), more specifically, the compulsory obligation to present the Digital Tax Bookkeeping (EFD), provided for in CAT Ordinance 147/09 – which contains many pieces of information, including those presented in the GIA – this document should be dismissed by the São Paulo Tax Authorities, as occurs in States such as Goiás and Mato Grosso do Sul. However, inexplicably, it was not.

Ancillary Obligations and the Material Limits for their Imposition

The State needs revenues to comply with the administrative powers assigned to it by the Constituent Power, and taxes are one of the sources of such revenues. Thus, when a law is enacted creating a particular tax, it is incumbent on the Executive Branch to comply with it, identifying the occurrence of tax and legal events and demanding the tax levied on them (article 142 of the Brazilian Tax Code).

In accordance with article 145, paragraph 1, of the Federal Constitution, it is incumbent on the tax authorities to grant effectiveness to the tax policy objectives, identify assets, income and economic activities of taxpayers, always looking for the individual rights provided for by the legislation.

For the satisfactory performance of this tax oversight, the law imposes on individuals and legal entities, taxpayers or not, including those enjoying tax immunity or exemption, the compliance with ancillary obligations, pursuant to article 113, paragraph 2, of the Brazilian Tax Code (CTN).

These are measures that allow translating, into the competent language, the behaviours that indicate whether the materiality drawn up in the rules governing the assessment basis of the tax are practiced or not. In this sense, Paulo de Barros Carvalho1 teaches that the ancillary obligations "play an important role in the implementation of the tax, because documenting everything that concerns the tax claim into language depends on the compliance with such ancillary obligations."

Although the Executive Branch can enact rules that create ancillary obligations, the exercise of this statutory assignment must be guided by material limits, mainly designated by the purpose expressly contained in the law and by fundamental constitutional principles, in particular, reasonableness and proportionality. To identify such limits, we must re-examine the provisions of article 113, paragraph 2, of the CTN.

In accordance with this legal provision, the ancillary obligations aim at the performance, either positive or negative, provided for in the tax legislation, established "in the interest of taxes collection or inspection".

From this rule, it can be surmised that the legislator defined the purpose of enacting the rule by establishing ancillary obligations. It is true that the administration is related to the general purpose of servicing the public interest2. However, article 113, paragraph 2 of the CTN, contains an explicit purpose, to wit, servicing the interest of the taxes collection and auditing.

We recognize that this explicit purpose is composed of indeterminate concepts, which implies the granting of discretion by the legislator, whereby the administration can establish different valid solutions, released as ancillary obligations, under the argument that it seeks to bestow efficiency to the exercise of its powers to audit and collect taxes.

However, even though the concepts listed in article 113, paragraph 2 of the CTN are vague and inaccurate, they have some minimum undisputed content, which should be interpreted systematically in order to limit the contents of the administrative act and prevent abuses and arbitrariness.

Furthermore, to determine which positive or negative performances allow that taxes be audited and collected, the administration must choose the most efficient way, which is possible if the principles of reasonableness and proportionality are observed.

The principle of reasonableness is contained in article 111 of the Constitution of the State of São Paulo, and can be identified also in other legal provisions, such as article 2, of Law 9784/99, which addresses the federal administrative process.

We refer to the already mentioned article 2, which, in its sole paragraph, jointly with article 29, paragraph 2, of Law 9784/99, seems to define the principle of reasonableness, by requiring the administration to (i) ensure the adequacy between means and ends, prohibiting the imposition of obligations, restrictions and penalties beyond those strictly necessary to meet the public interest; (ii) seek the adoption of simple ways, sufficient to provide an adequate degree of certainty, security and respect for the rights of those concerned; and (iii) perform fact-finding acts in the least costly manner for those interested.

According to Supreme Court Justice Luís Roberto Barroso3, the requirements to typify the reasonableness are (i) adequacy – measures to achieve the desired objectives; (ii) need or enforceability – lack of less demanding means; and (iii) proportionality in the strict sense – weighting between the burden imposed and the resulting benefit.

According to Humberto Ávila4, proportionality, "requires that the Legislative and the Executive Branches choose, to accomplish their purposes, appropriate, necessary and proportionate means. A means is appropriate if it promotes the end; it is necessary if, among all those means also suitable to promote the end, it is the least restrictive in respect of fundamental rights; and proportionate, in the strict sense, if the advantages it promotes outweighs the disadvantages it causes. Proportionality requires the relationship of causality between means and end, in such a way that, by adopting the means, the end is promoted".

By analysing these principles of reasonableness and proportionality, we conclude that the instrumental obligation will be proportionate when it enables the Administration to exercise the auditing and collection of taxes, causing however minimal harm to the fundamental rights of those concerned, and ensuring the efficiency of the State's financial activity for the public interest.

Further, it will be reasonable if, from a circumstantial analysis, it is clear that the provision imposed is within the normal range, with congruent relationship between the differentiation criterion chosen and the measure adopted, as well as an equivalence relationship between such provision and meeting the interests of the tax auditing and collection.

It is noteworthy that the excessive burden of the ancillary obligations must be eliminated in compliance with the principles of reasonableness and proportionality, which otherwise might interfere in the competition, as warned by Tércio Sampaio Ferraz Jr.5, according to whom "the imposition of ancillary tax obligations, to be typified as an abstract measure and, in terms of competitive neutrality, as legitimate, must have an equitable impact among competitors."

We issue a challenge for any research entity to conduct surveys of all ancillary obligations to which a Brazilian company is subject when it operates in the federal, state and municipal areas of responsibility.


  1. CARVALHO, Paulo de Barros. Direito tributário, linguagem e método. Op. cit., p. 424.
  2. DI PIETRO, Maria Sylvia Zanella. Discricionariedade administrativa na Constituição de 1988. Op. cit., p.
  3. BARROSO, Luís Roberto. Os princípios da razoabilidade e da proporcionalidade no Direito Constitucional, in Cadernos de Direito Constitucional e Ciência Política, São Paulo, RT, volume 23, April to July 1998, pp. 65 to 78.
  4. ÁVILA, Humberto. Teoria dos princípios – da definição à aplicação dos princípios jurídicos. 5 ed. ver. e ampl. São Paulo: Malheiros, 2006, p. 146 and 169.
  5. FERRAZ JÚNIOR, Tércio Sampaio. “Obrigação tributária acessória e limites de imposição: razoabilidade e neutralidade concorrencial do Estado”. In: FERRAZ, Roberto (Coord.). Princípios e limites da tributação. São Paulo: Quartier Latin, 2005.

All acronyms refer to the terms in Portuguese.