Brazil’s Tax System Is Barrier to OECD Membership

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By Sony Kassam and Alex Parker

Brazil’s unique international tax rules present a significant challenge for both the OECD and Brazil, as the South American country seeks to join the international organization.

However, the challenges aren’t insurmountable.

The push for Brazil to join the Organization for Economic Cooperation and Development “is a little bit rushed,” Sergio Andre Rocha, professor of tax law in Rio de Janeiro State University, said during an Aug. 29 panel discussion at the International Fiscal Association Congress in Rio de Janeiro.

Brazil—Latin America’s largest economy, which has endured political instability over the past few years—formally applied for OECD membership in May.

Divergent Rules

Brazil, a Group of 20 country, has “significant divergences” in its simplified approach to international tax, according to Rocha. Although Brazil is a member of the OECD’s Global Forum on Transparency and Exchange of Information for Tax Purposes, it doesn’t observe the OECD standard on international tax and transfer pricing.

Brazil is a “very influential country” with a “very significant economy” and strong views, Pascal Saint-Amans, the OECD’s director for tax policy and administration, said during an Aug. 28 news conference in Rio de Janeiro. The country has a tradition of using transfer pricing methods that differ from the arm’s-length standard.

Saint-Amans also said the country’s “tax treaty policy has been quite specific, to the point where some treaties were terminated,” including one between Brazil and Germany.

The features of Brazil’s international tax policy aim to protect the country’s tax base and to create a system that is easy for the Brazilian tax administration and the country’s taxpayers to apply, according to Rocha.

Protecting Brazil’s Tax Base

A conversation is needed, Rocha said, on whether it makes sense for Brazil to join the OECD.

However, discussions on international tax “may not be that easy,” Saint-Amans said. “There will be a debate.”

Having a tax system that isn’t aligned with international standards is inconvenient, according to Saint-Amans, because it may not attract investors. Even so, he said Brazil’s need to protect its tax base has merit.

Rocha said he hopes “Brazil does not give up its very well-developed” international tax policy.

But would Brazil be able to join the OECD without changing its tax system? “No,” Saint-Amans said. “The answer is no.”

Gaps in Approach

An assessment is needed, Saint-Amans said, to understand and bridge the gaps between the OECD’s international tax approach and Brazil’s approach.

“Is it a roadblock that cannot be overcome? Probably not,” Saint-Amans said.

There has already been progress, he said, with an eye toward the OECD’s plan to combat base erosion and profit shifting. “Brazil has changed. Brazil has adopted a number of the BEPS measures. The OECD has changed, and has taken into consideration the need to fight tax avoidance, the need to fight tax fraud.”

To contact the reporters on this story: Sony Kassam in Rio de Janeiro at and Alex Parker in Rio de Janeiro at aparker@bna.comTo contact the editor responsible for this story: Cheryl Saenz at

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