Charging IPVA for jets and yachts may be innocuous – 07/07/2023 – Market

The text of the Tax Reform that passed in the Chamber of Deputies early this Friday (7) included jets, jet-skis and luxury boats in the list of vehicles that will need to pay IPVA (Tax on Motor Vehicle Ownership). However, even if the text is approved without changes in the Senate, there is a possibility that the measure will not be effective.

The proposal of the rapporteur Aguinaldo Ribeiro (PP-PB) provides for the collection of tax on water and air vehicles that are currently exempt. The issue is that the version of the PEC (proposed amendment to the Constitution) that was voted on shields some vehicles, such as transport planes and boats aimed at artisanal and subsistence fishing.

According to Unafisco (National Association of Tax Auditors of the Federal Revenue Service), this loophole opens up room for tax avoidance. Owners of boats for leisure purposes, for example, could misuse the classification of artisanal fishing to avoid taxation

Currently, the Constitution provides that the state tax is levied on owners of motor vehicles, without specifying which ones.

The interpretation of the STF (Federal Supreme Court) is that the tax is only levied on land motor vehicles. In recent decades, the Court even barred the attempt to charge by some states, such as Rio de Janeiro, São Paulo and Amazonas.

For the court, the IPVA succeeded the former TRU (Single Road Tax), which historically excluded vessels and aircraft from payment.

As the Tax Reform changes the constitutional text, these restrictions would be overcome, allowing the collection of the tax for private jets and yachts, which has the potential to increase the State’s collection.

A 2020 study by the National Sindifisco (the Federal Revenue auditors union) estimated additional revenue of BRL 4.7 billion per year with the expansion of the tax base. This would represent an increase of almost 10% in IPVA collection.

Almost 90% of this value refers to vessels, and the other 10% to jet aircraft, turboprops and helicopters.

The rapporteur’s proposal made an exception for airplanes and passenger transport boats, as well as boats dedicated to industrial, artisanal, scientific or subsistence fishing. The tax will not apply to agricultural aircraft either.

The text of the PEC justifies the measure by saying that the tax does not have the bias of burdening productive activity. “Its objective is to reach goods used by people with high purchasing power of high value, which today are not taxed, in a clear mismatch with the tax applied on motor vehicles of popular use.”

The rapporteur also considers that, although the main focus of this phase of the Tax Reform is the taxation of consumption, there was an understanding that it would be possible to advance in some aspects of property taxation that have long required intervention.

“It is not fair that middle-class taxpayers bear the tax on the ownership of their used cars or motorcycles while owners of speedboats, yachts and jets are exempt”, says the text.

However, Unafisco says that the exceptions considered by the rapporteur will make charging the tax on luxury vessels innocuous.

In addition to the ease of changing the classification of the boat —from leisure to artisanal fishing, for example—, the difficulty in tracking and proving the true use of the boats would jeopardize the effectiveness of tax collection.

“The evident lack of criteria and technical, tax, social and macroeconomic elements of the proposal will result in the maintenance of this scandalous tax privilege, especially when treatment is not equal in the acquisition of land vehicles. , which is fair, similar tax immunity should be granted for the IPVA of motorcycles and cars with the same function”, says Unafisco in a note.

For Mauro Silva, president of Unafisco, generic immunity, without regulation in a complementary law, will be a safe conduct for the continuation of this tax injustice.

“These loopholes can thwart the government’s effort to seek fiscal justice and increase revenue due to the potential misuse of vessels classified for artisanal and subsistence fishing, along with difficulties in enforcing and combating potential fraud. These loopholes need to be carefully evaluated. exceptions and ensure that tax measures are fair and effective for all sectors involved”, says Unafisco.