The Illegality and Unconstitutionality of the Practice of “Cross-Benefit” of IPI in the Alcoholic Beverage Industry

Abstract

This paper presents the constitutional foundations of the IPI, detaching its selectivity and non-cumulative nature, and then goes on to deal with the tax exemptions of the Manaus Free Trade Zone, especially the one applicable to “concentrate”, the main raw material used in the manufacture of soft drinks. In addition to the exemption, industries acquiring concentrates for use as raw materials are entitled to appropriate a presumed credit calculated on the value of the IPI as if it were due. The “cross benefit” refers to the use of presumed IPI credits from the acquisition of exempt inputs industrialized in the ZFM, such as compound preparations, to offset against IPI debits for other products, including alcoholic beverages. The paper argues that the use of these credits in the form of a “cross benefit” to offset debts relating to the sale of alcoholic beverages is at odds with the original purpose of the tax incentives, and is illegal and unconstitutional because it violates the principles of equality and free competition.