The Taxation of Micro-Electric Solar Power Generation in Brazil

Abstract

The micro-generation of electric energy seems to be an ecologically appropriate solution to the problem created by the increasing demand for electricity. Its fiscal cost may, however, make its adoption impracticable in a short time, especially if affected by an irrational taxation. In the case of the Brazilian ICMS, it is precisely what happened – and it is still happening in some Brazilian states. States charge the tax on the electrical energy consumed and on the electrical energy produced, in duplicate; and not only on the current account balance established between the consumer and the electric power distribution company. This neutralizes any advantage of acquiring the equipment which generates electricity from solar energy. Tax exemption, which is starting to be granted by some Brazilian States, is a possible solution, although it is not the most appropriate. In addition to requiring an edition of a new legislative act for each of the Brazilian states, it implies a casuistry that only increases the complexity of the legislation, disdaining further the principle of “value added” tax. It would be more appropriate for the public authorities to no longer use environmental arguments for rhetorical purposes intended to justify increases in the tax burden (for example, with the creation of taxes to be paid by polluters), adjusting the tax legislation and its application by the tax authorities for purposes effectively related to the protection of the environment.