Brazil's Supreme Court resumes judgment on tax exemptions for pesticides.

The Brazilian Supreme Court (STF) has resumed the trial of Direct Actions of Unconstitutionality (ADIs) 5553 and 7755, which challenge tax benefits applied to the sale of pesticides. The actions were filed by the PSOL and the Green Party.

The parties are questioning provisions of Confaz Agreement 100/1997, which reduce the ICMS tax base for pesticides by 60%, and regulations that establish a zero IPI tax rate for these products. The Green Party (PV) is also contesting a section of Constitutional Amendment 132/2023, which allows for a differentiated tax regime for agricultural inputs.

So far, two ministers have voted.

Justice Edson Fachin argued that the incentives were unconstitutional. He reasoned that the tax system should consider the environmental impact of products and apply a higher tax burden to more harmful items.

According to Fachin, differentiated taxation can stimulate innovation and reduce risks to health and the environment. He voted for the unconstitutionality of clauses one and three of Agreement 100/1997, the zero rate provided for in Decree 11.158/2022, and a section of Constitutional Amendment 132/2023. He suggested that the decision should not have retroactive effects.

André Mendonça partially dissented. He considered the tax benefits for agricultural inputs to be constitutional. He highlighted that Amendment 132 constitutionalized this fiscal policy. He recalled that the use of incentives has always been part of the national agricultural policy.

Mendonça acknowledged the toxicity of the products, but advocated for a balance between incentives and environmental protection. He proposed incentives only for more efficient and less toxic inputs.