SOCIETÀ ITALIANA DI DIRITTO ED ECONOMIA
FABIANO LARA (UFMG)
ANTONIO PAULO MACHADO GOMES (IBMEC)
Jacqueline Veneroso Alves da Cunha (UFMG)
Abstract
Brazil is a favourable country for tax research, as it has high tax complexity and relevant institutional characteristics, such as special instalment plans. All these aspects can make a substantial contribution to understanding business and individual behaviour in the face of taxation. In this sense, the aim of this research is to answer the following question: What is the impact of tax transactions on companies' decisions to terminate (or not) their tax and legal claims, in the light of game theory? To this end, a theoretical model based on Game Theory and Gomes et al. (2023) was developed to identify the best strategic decision for taxpayers in view of Brazil's tax complexity and tax transaction agreements. As a result, it was observed that the only Nash equilibrium is {disobey (challenge, appeal, embargo, instalment); inspect (assess)}, demonstrating that tax complexity and repetitive special instalment agreements encourage tax disobedience, even though the taxpayer has to bear the increase in tax debt due to legal charges and the costs of guaranteeing the tax lawsuit, such as a judicial deposit, insurance and guarantee bond or pledge. In order to confirm the theoretical findings and empirically prove them, the Gerdau Internal Goodwill Case Study was carried out. The empirical results corroborated the theoretical findings, showing that the long-term nature of tax collection in Brazil, combined with the State's frequent need for cash, encourages taxpayer non-compliance. It is hoped that this study will contribute to demonstrating the need to remove unnecessary tax complexity from the Brazilian tax system.