Tech Roundup: E-commerce tax worries state governments

This week. Brazilian states could lose billions over e-commerce tax muddle. Electric cars enjoy a record year in Brazil. Study shows that employees are keener on remote work than their bosses. 

Brazilian states could lose billions from e-commerce tax in 2022

E-commerce has seen a boom in Brazil, almost entirely due to coronavirus restrictions placed on brick-and-mortar stores over the past 20 months. While the strategy has been a boon for retailers and tax-collecting governments alike, Brazilian states could lose up to BRL 9.8 billion (USD 1.74 billion) in e-commerce tax revenues this year, due to a loophole in a recently approved piece of legislation. 

What happened. On December 20, the Brazilian Senate approved a supplementary bill to regulate the so-called tax differential on the ICMS state goods and services tax. This mechanism is used to share e-commerce tax revenue between the origin state of the company that produces said goods or services, and the state where the consumer is located.

• Until now, ICMS tax collection had been carried out by way of different agreements made with the National Finance Policy Council (Confaz). However, big retailers have begun contesting their validity in courts.
• As a result, Brazil’s Supreme Court ruled that a large part of the legislation on the matter was unconstitutional, and that it would lose force on January 1, 2022.

Uh-oh. As of this year, for the states to collect ICMS tax on e-commerce, the new supplementary law must already be in force. While the Senate has approved the proposal, President Jair Bolsonaro has yet to ratify it. 

• According to the Senate’s news agency, “the bill’s rules will come into effect only 90 days after the law is published, but as the Supreme Court ruled that the old legislation is not valid from January 2022 onward, there will be a period without any regulation in force.”

No agreement. At the end of last year, Confaz itself had asked for the bill to be approved...