Rural Land Tax: the evolution of the republican tax

The Rural Territorial Tax (ITR) is a tax directly related to the emergence of the Brazilian Republic and its agrarian face. In the country, the ITR was introduced by the Constitution of the Republic of the United States of Brazil, in 1891, through its article 9, which attributed competence to the federative states: “art. 9th - It is the exclusive competence of the states to enact taxes: 2nd) on rural and urban properties”.

For the first time in the history of Brazil, taxes gained constitutional status, allowing for greater institutionalization, extensive regulation and transparency. Over the years, its collection and institution remained the responsibility of the states:

• Constitution of the Republic of the United States of Brazil of 1934: “Art. 8th - It is also the exclusive responsibility of the states: I - to decree taxes on: a) territorial property, except urban property”.

• Constitution of the Republic of the United States of Brazil of 1937: “Art. 23 - It is the exclusive competence of the states, except as stated in art. 35, letter d: I - the decree of taxes on: a) territorial property, except urban”.

• Constitution of the United States of Brazil of 1946: “Art. 19. It is up to the states to decree taxes on: I - territorial property, except urban property”.

Constitutional Amendment nº 5 of 1961, in turn, transfers the competence to the municipalities, being surpassed only three years later, by EC nº 10 of 1964, which assigns the competence to the Union.

The tax that was previously merely fiscal gained new contours with the Land Statute of 1964, which aimed to regulate the rights and obligations of rural assets, for the purposes of implementing agrarian reform and promoting agricultural policy. For this diploma, property would fully perform its social function when simultaneously:

a) favors the well-being of the owners and workers who work there, as well as their families;

b) maintains satisfactory levels of productivity;

c) ensures the conservation of natural resources;

d) observes the legal provisions that regulate fair working relationships between those who own and cultivate it.

The proposal of Law No. 4.504/1964 was precisely to use the Rural Land Tax as an important instrument to combat unproductivity and redistribute expropriated land. To this end, the statute created various guidelines for agrarian reform, such as periodic plans and funding funds. After the 1979 reform, the law, in addition to establishing progressive rates depending on the size of the taxed area, provided for the possibility of a reduction of up to 90% as a fiscal stimulus, depending on the degree of economic use of the rural property, as follows :

a) reduction of up to 45%, due to the degree of land use, measured by the ratio between the area actually used and the total usable area of ​​the rural property;

b) reduction of up to 45% by the degree of efficiency in exploitation, measured by the relationship between the yield obtained per hectare for each product exploited and the corresponding regional indices set by the Executive Branch and multiplied by the degree of land use, referred to in paragraph "a " of this paragraph.

The vast extension of the country, however, meant that the tax underwent some changes in the Federal Constitution of 1988. Constitutional Amendment No. 42 of 2003 modified arts. 153 and 158 regarding the inspection and collection of the ITR, with the entire tax collected falling to the municipalities that assume such responsibilities. The distribution takes place through the Federal Revenue of Brazil, through an agreement, the adherence to which depends on the municipality proving its possession of a technological structure and an effective staff of employees with the attribution of launching tax credits approved in a public tender.

The new Magna Carta also reinforced the extra-fiscal nature of the tax, establishing two distinct situations:

(1) promotion of the appropriate and efficient use of rural territorial space, providing in § 4 of art. 153 that the tax will be progressive and its rates will be set in such a way as to discourage unproductive properties; It is

(2) defense of small landowners, as small rural plots, defined by law, are immune to payment of the ITR, when exploited by an owner who does not own another property.

In this way, we sought to inhibit the existence of unproductive large estates and, at the same time, provide different and more beneficial treatment to small rural producers. These are norms that seek to implement the social function of property and taxation according to contributory capacity.

Finally, in the current scenario of Rural Land Tax, Decree nº 4.382/2002 thoroughly regulated the tax, defining aspects such as tax liability, incidence, exemption and immunity. The most complex and interesting point of the diploma is, in turn, the definition of non-taxable area, which allows the exclusion of areas in the calculation of property size:

I - permanent preservation - Forest Code, arts. 2nd and 3rd;

II - legal reserve;

III – private natural heritage reserve;

IV – forestry servitude;

V - of ecological interest for the protection of ecosystems, declared by act of the competent body, federal or state, and which expand the restrictions on use provided for in items I and II of the caput of this article;

VI - proven to be useless for rural activities, declared to be of ecological interest by act of the competent federal or state body.

When analyzing the trajectory of the ITR, it is clear how the tax, beyond taxing rural areas, has a much greater objective: to encourage rural production and reduce the country's inequalities. Far from being a perfect model, with each legislative update the tax improves in pursuit of its purpose, aiming to promote economic activity that is responsible for the largest share of the country's GDP.

By Flávia Sant'Anna Benites, partner at Ernesto Borges Advogados