Deputies disagreed about the constitutionality of the agreement, which aims to combat tax evasion

The Committee on Constitution and Justice and Citizenship approved on Wednesday (28th) an agreement between Brazil and the United States on the exchange of tax information (Bill 413/07). The rapporteur on the CCJ, Deputy Regis de Oliveira (PSC-SP), recommended the rejection of the agreement, deeming it unconstitutional. The committee, however, decided to approve the text, following the report of Deputy Flávio Dino (PCdoB-MA).

According to Flávio Dino, the agreement will contribute to the fight against tax evasion and to the adoption of measures to avoid double taxation. The agreement applies only to federal taxes, allowing information subject to exchange to be used even for investigations of criminal activity.

In the Brazilian side, the agreement will apply, for example, to the Income Tax of individuals and legal entities, and to the Tax on Industrialized Products (IPI), the Tax on Financial Operations (IOF), the Tax on Rural Property (ITR) and to the Social Contribution on Net Income (CSLL). In the case of the United States the federal taxes on income, on self-employment, inheritances and donations and federal taxes on consumption are included under the agreement.

Authority to sign
In his vote, Regis de Oliveira argued that the proposal had a “competence flaw” since it was signed by the Secretary of the Internal Revenue Service, who represented the Brazilian government. "Only the President in his capacity as head of State can sign international agreements aimed at the creation of obligations," he maintained.

Flávio Dino said, however, that the Secretary was entitled to sign the agreement through a letter of full powers. In this case, he said, "there is no transfer of the judgement on the convenience and opportunity of completing the act. This judgement is maintened as a private power of the person entitled to conclude the agreement, which remains the President of the Republic."
Dino explained that the letter of full powers is provided in the Vienna Convention of 1969, and has been used by the Brazilian diplomatic service for a long time, since it would be impossible for the head of State to attend all the celebrations of international acts. "It should be noted that between 2000 and 2008 alone Brazil signed 2169 international acts and in only 39 the personal signature of the president was placed."

Deputy Jose Genoino (PT-SP), which presented a separate vote on the agreement, was of the same opinion. In addition to agreeing that the use of the letter is entirely legitimate, the deputy added that the agreement has to be ratified by the President of the Republic himself, after approval by the Congress.

Sovereignty
Regis de Oliveira also found unconstitutional the content of the proposal. For him, the agreement violates the principle of national sovereignty, because it will allow the U.S. authorities to supervise companies in Brazil.

In his view, tax administration shall be exercised only by civil servants of specific careers. "The taxpayer is obliged to give up the secrecy of his personal information only to the constituted authority in Brazil, and not to foreign authorities."

Flávio Dino said, instead, that the text does not require any party to provide information subject to legal privilege, or which are able to reveal any secrets, of business, industrial, trade or professional nature. "There is still the possibility of refusing to provide assistance when disclosure of the information requested would be contrary to the public interest of the party requested," he added.

Procedure
The bill will still be voted by the Floor. The proposal, authored by the Committee on Foreign Relations and National Defense, originated in Message 741/07, from the Executive branch.

Report - Maria Neves
Edition - Pierre Triboli
Translation – Rejane Xavier