‎Brazil News

Associations in the footwear sector filed a lawsuit with the Federal Supreme Court (STF) against the federal government's Conform Remittance program, which provides for tax exemption for imported products purchased online up to US$50, even if sent by legal entities.

 

In the request, the entities maintain that the prerogative to set import tax rates does not belong to the Ministry of Finance, but to the Chamber of Foreign Commerce (Camex). Minister Cármen Lúcia was selected as rapporteur for the case.

 

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Direct Unconstitutionality Action (ADI) 7,503 was proposed by the Brazilian Association of Footwear Industries (Abicalçados) together with the Brazilian Association of Component Companies for Leather, Footwear and Artifacts (Assintecal) on October 26th. The Federation of Industries of the State of Minas Gerasi (FIEMG) asked to join as amicus curiae in the process.

 

 

According to Abicalçados and Assintecal, in relation to foreign trade, the Ministry of Finance only has the function of inspection and control. “There is, therefore, no delegation of executive powers to the Treasury to exercise functions linked to commercial policy, in particular the definition of import tax rates”, they highlight.

 

“The extra-fiscal nature of the import tax does not guarantee the Executive Branch a blank check to, according to its convenience and opportunity, freely change the tax rates; Yes, you can do so, as long as specific legal guidelines are met”, say lawyers Rita de Cássia Correard Teixeira, Felipe Rainato, Aron Storch and Gabriela de Carvalho Barbosa, from Hondatar Advogados.

 

Last year, ecommerce platforms earned R$1.8 billion from footwear sales in Brazil, an amount that corresponds to almost 20% of the total value of online footwear retail in the country. And “for every R$ 1 billion that the national footwear industry stops producing corresponds to the lack of generation of 8.5 thousand jobs directly, 6 thousand indirectly and 1.8 thousand through the income effect, all due to of commercialization without the due tax equality to which e-commerce platforms should be subject”.

 

They state that “the Executive's competence to change the import tax rate is now subject to the approval of the other members of Mercosur, restricting a large portion of the country's sovereignty and autonomy in matters of tariff policy”.

 

By unilaterally reducing the import tax rate on remittances, the associations claim that the Treasury created “a specific tariff regime without legal support or authorization from Mercosur, which cannot coexist with the constitutional order”.

 

Finally, they also state that the ordinance violates the principle of tax equality, since “national sales of products to the final consumer, whether in the context of electronic commerce or in physical retail, are still normally recorded, without the provision of granting tax benefits to closed businesses in an amount equivalent to US$50”.

 

“In other words, while companies operating in Brazil suffer from the incidence of PIS, Cofins and IPI on any and all sales destined for the national market, products imported through foreign companies are exempt up to a limit of US$50.00. . This creates unequal competition in favor of products sold by the aforementioned digital platforms”, write the lawyers.

 

The case will be judged in ADI 7,503.