Supreme Court rejects action against import taxation program

Minister Cármen Lúcia, of the Federal Supreme Court (STF), decided to reject a lawsuit that questioned the federal government’s Remessa Conform program, which came into force in August this year and provides for differentiated tax collection for imported products.

The Direct Unconstitutionality Action (ADI) 7503, reached the Supreme Court in November, filed by the Brazilian Association of Footwear Industries (Abicalçados) and the Brazilian Association of Companies of Components for Leather, Footwear and Artifacts (Assintecal).

The entities maintained that the Ministry of Finance, which issued the ordinance, does not have the authority to discretionarily change the Import Tax rates. They also argued that the measure violates the principle of tax equality, especially regarding industry and national retail, as it is not an exemption or other conditional tax benefit.

The associations asked for the suspension of the ordinance that established the program until the merits of the action were judged by all the Court’s ministers. The reporting minister Cármem Lúcia, however, decided to reject the request and maintain the operation of the Lula government program.

According to the minister’s logic, the questioned standards affect e-commerce companies that carry out various economic activities, and not just those linked to the production of footwear and leather in general. Therefore, the associations would not be qualified to propose actions in the STF questioning their validity, as they would only represent a portion of the economic activities affected by the questioned rules.

She also argued that the ordinance in question was issued based on Decree-Law 1804/1980. Therefore, she explains, to question the constitutionality of the ordinance it would be necessary to first question the decree, which would be unfeasible in the Supreme Court.

Understand the Industry’s criticisms of Conformal Shipping

The Remessa Controle program mainly benefits websites such as Shein and AliExpress, widely used by Brazilians to purchase various products, such as clothing items, toys and miscellaneous items. However, Brazilian traders and industrialists claim that they are harmed, as they do not benefit from exemptions from other taxes – which creates unequal competition, according to the president of the National Confederation of Industry (CNI), Robson Braga de Andrade, in a meeting with the President Luiz Inácio Lula da Silva (PT) in July.

In summary, the program establishes differentiated customs treatment for e-commerce companies that voluntarily meet criteria established by the agency. One of the requirements is to provide in advance the information necessary for the risk management of international shipments.

The Minister of Finance, Fernando Haddad, and the First Lady, Janja, even stated that the taxes on imported goods would not be passed on to the final consumer. But, as occurs in any transaction in commerce, the tax was naturally passed on to buyers: in the sum of federal and state tax (ICMS), Brazilians who buy from websites that joined the program are paying 92% in taxes on purchases above US$ 50 (including shipping).

Amid various initiatives to increase revenue, the government is also considering taxing purchases below US$50. When preparing the 2024 Budget, the government used a technical note from the IRS with a federal tax forecast of 28% for these operations.