Legislation - Rationales

"EM no. 636/Ministry of Finance (MF)

Brasília, December 26, 1996.

Your Excellency Mr. President of the Republic,

We are honored to submit to your appreciation the Bill attached hereto, which amends the federal tax legislation.

2. On December 26, 1995, Laws no. 9249 and 9250 were enacted, and in view of the simplification, harmonization and standardization criteria therein adopted, soon became a milestone on the path to modernizing the income tax legislation.

3. The current bill is to be considered in the realm of such modernization effort and, given its more comprehensive nature, extends to other areas the principles under which referred legislation was created, while enhancing the mechanisms that permit agile and efficient verification of the fulfillment of the tax obligation within the current market practices, in an increasingly globalized economy.

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12. The rules prescribed by articles 18 through 24 represent a significant development in the national legislation in view of the irrepressible globalization process experienced by the economies of the contemporary world. In this specific case, in accordance with the rules adopted by OECD member countries, provisions are proposed so as to enable control over the so-called "Transfer Prices", with the purpose to avoid a practice which is contrary to the national interests, namely, the transfer of results abroad by manipulating prices adopted in imports or exports of goods, services or rights in transactions with related parties resident or domiciled abroad.

PEDRO MALAN"