State-level tax compliance programs in Brazil: risk assessment tools or cooperative compliance programs?

Countries around the world have struggled to establish a good relationship with their taxpayers. This has led tax administrations to develop cooperative compliance programs. Cooperative compliance is based on openness, collaboration, and mutual trust between taxpayers and tax authorities, and it is characterized as “transparency in exchange for certainty”. [[i]]

Cooperative compliance gained particular attention after the OECD endorsed the idea that a relationship based on trust could benefit both taxpayers and the tax administration and published a series of reports based on countries’ experiences. Other international organizations, including CIAT, also played a role in encouraging cooperative compliance programs. [[ii]]

Why Brazil is a breeding ground for cooperative compliance programs?

Cooperative compliance programs are expected to improve the relationship between taxpayers and the tax administration. Historically, Brazilian tax authorities have had an adversarial relationship with taxpayers. High tax litigation is a testament to how this relationship has deteriorated and how confrontational it has become over the years.

Litigation in tax matters includes not only tax foreclosure cases brought by the tax administration to recover tax debts from taxpayers, but also substantial administrative and judicial procedures brought by taxpayers to challenge tax notices. Tax uncertainty is at the heart of tax disputes and litigation in Brazil.

Brazil’s complex and intricate tax system where a multitude of taxes coexist each with its own rules, is one of the reasons taxpayers complain of tax uncertainty. For instance, a survey-based study to measure corporation tax uncertainty puts Brazil among the top-ranking countries regarding tax uncertainty, second only to India [[iii]].

Despite this context, which would be the perfect breeding ground for a cooperative compliance program in the country, and the fact that cooperative compliance programs have been gradually implemented by tax administrations around the world over the last two decades, until recently, Brazil had no formal cooperative compliance program.

An overview of state-level tax compliance programs

Brazil has a federal structure with three levels of government—federal, state, and municipal—each with its own taxes. State taxes include state-level VAT, gift and inheritance tax, and vehicle tax. State-level VAT is certainly the most important among state taxes in terms of tax revenues corresponding to more than ¾ of state tax revenues.

The state of São Paulo was on the forefront when it comes to implementing a compliance program as it created a state-level program called “Nos Conformes” in 2018. Taxpayers met the initiative with enthusiasm, as it was one of Brazil’s first efforts to encourage voluntary tax compliance.

Nos Conformes is based on a compliance grading system for taxpayers according to previous compliance with state-level VAT. Taxpayers are classified from A+ to E (and N/C meaning not classified) based on two main factors: whether taxpayers paid taxes when they were due and whether taxpayers’ books and tax returns correspond to their commercial invoices.

Taxpayers awarded a high grade are entitled to simplified procedures including for tax refunds, renewal of special tax regimes, and the use of accumulated input state VAT credits [[iv]]. Taxpayers can access their grades through a restricted-access platform and if they agree the information is made available to the public. Hence, the program also provides a reputational benefit for compliant taxpayers.

Following in the state of São Paulo’s footsteps, many other states in Brazil have implemented similar programs. The names and details vary from state to state, but the programs’ core guidelines all encourage taxpayers’ voluntary compliance and intend to enhance their relationship with the tax administration [[v]].

Other initiatives to build trust and improve relationships were also considered.  For instance, in addition to a program based on a grading system according to taxpayers’ previous tax compliance, the state of Rio Grande do Sul’s legislation includes a code of good tax practices and a forum for discussion with representatives from different business sectors.

However, state-level programs can be characterized more as a risk-assessment tool than a cooperative compliance initiative. Cooperative compliance programs are certainly used for risk-management purposes, but their focus is on the voluntary disclosure of information by taxpayers in exchange for tax certainty by tax authorities. State-level programs do not provide certainty but instead offers incentives for low-risk taxpayers.


State-level compliance programs rely on risk-management tools that offer incentives for compliant taxpayers. Offering benefits for compliant taxpayers can certainly induce taxpayers’ compliance, but only to a limited extent. For those programs to be more effective in establishing a collaborative relationship with taxpayers, they should also include a mechanism by which taxpayers disclose additional information in exchange for early certainty of their tax positions.

[[i]]  OECD, 2013. Co-operative Compliance: A Framework – From Enhanced Relationship to Cooperative Compliance. Paris: OECD Publishing, p. 29.

[[ii]] CIAT, 2022. CIAT Manual for the Control of International Tax Planning, Available at:

[[iii]] Devereux, M. 2016. Measuring Corporation Tax Uncertainty across Countries: Evidence from a Cross-Country Survey. Working Paper 16/13. Oxford, UK: Oxford University Centre for Business Taxation. Available at:

[[iv]]  For more details on the Nos Conformes program, see Frequent Asked Questions (FAQ). Available at:

[[v]States offering programs to encourage tax compliance include: Alagoas (Contribuinte Arretado), Ceará (Contribuinte Pai d’Égua), Mato Grosso (Programa de Autoregularização), Minas Gerais (Contribuinte Bom Pagador), Piauí (Contribuinte Legal), Rio de Janeiro (Projeto de Lei de Conformidade Tributária), Rio Grande do Norte (Contribuinte Exemplar), Rio Grande do Sul (Nos Conformes), and Rondônia (Fisconforme).

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