The Dance of the Lions






(1) Sovereignty, Globalization and Taxation


§87. The idea of State, such as stated in the beginning of the Modern Age, by Hobbes, Bodin and other thinkers, and yet today prevalent in the international war between the States in relation to the collection of revenue, is founded in sovereignty.

§88. Sovereignty is the same that the supreme power, the power in last instance. How there is no one power of human origin on all global territory, but instead many powers, the sovereign power, such as planned as the soul of the States, it is intimately (or better saying, by necessity) related to a territorial issue – the territory of the States. In this sense, there is one sovereign power for a specific location and in this territory such power determines of what and of whom will extract its source of livelihood, taxing specific facts, such as the acquisition of income. Mutatis mutandis, the same logic applies to the juridical-economical unions, such as European Union, as well as applies to infra-federative entities, such as the Federative States that constitute the Federative Republic of Brazil.

§89. Occurs that, such as the human nature is self-interested and ravenous, also are the States (even because they are made at our image and likeness), and this implies in the phenomenon of the State entities make war against each other for food. It is in this point that the issue of international taxation begins to appear.

§90. In craving for income, was stated the notion of World-wide Income Taxation, which is the same as expressing that, e.g., a Brazilian citizen, resident in Brazilian territory, also has to pay taxes because of other incomes in other location of the World.

§91. In the Brazilian Tax Code the World-wide Income Taxation appears in a clear way in the amendment introduced by the Complementary Law 104/2.001, which one added paragraphs to the caput of the Article 43 of the Tax Code, that remained in this way:

Article 43. The tax, charged by Federative Union, on income and earnings of any nature has as generation fact the acquisition of economical or juridical availability: I – of income, considering this the product of capital, of work or of the combination of both; II – of earnings of any nature, considering this the patrimonial increase not included in the precedent incise. §1º The incidence of the tax not depends of the designation of revenue or earnings, nor the location, juridical conditions or nationality of the source, its origin and the form of acquirement. §2º In the case of income or profits from abroad, the law will establishes the conditions and the moment in which these earnings will be available for the end of taxation of the Income Tax

§92. Then, fast we can view that business in two jurisdictions (in which two sovereign entities say the law, juris dictio) will be extremely jeopardize considering that the same fact will give birth to a double tax charge. Imagine, so, dear reader, have to feed not one but two Lions? The market, the companies and the citizens shall be defended. But how to do this if, as a rule, whom shall defend them it is the State itself?

§93. Dear reader, if you are already thinking about international organizations, do not be naive, because in tax issues (and in many others) this is yet a far horizon in the point of view of effectiveness, and of the power’s practice.

§94. The central solution is not something externally imposed, but as self-consciousness of the States in find, each one according its peculiarities and considering the peculiarities of the others, the best strategy and equilibrium. Best strategy to promote its Economy in the global market, even attracting external investment at the same time that brings energy to its industry, commerce and services. And equilibrium in search of fair tax collection to citizens, but, at the same time, a tax collection that do not lets the State starve.

§95. But as we are naturally unbalanced in our temper, and the State (at our image and likeness, and governed by us, human beings) also it is, the conquers of a little more equilibrium and strategy are given to hard and slow steps. Among these steps are the International Tax Treaties to avoid double taxation.


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Rafael De Conti, Rafael Augusto De Conti, Brazilian Tax Lawyer, Lawyer in Brazil