Double standards in the budget: why cutting taxes requires an audit while raising taxes or creating state-owned firms passes without a calculation

In any serious engineering or technology company, a basic rule of financial governance applies: you do not ask shareholders for more capital or raise prices on customers without first proving, with audited numbers, that operational waste has been cut and that a new venture will not generate structural losses.

In Brazilian public finance law, the exact opposite happens. The legal system has built a structural asymmetry against those who work, produce, and pay taxes: the law is unforgiving when someone tries to reduce a tax, yet permissive when the Executive Branch or Congress decides to raise the tax burden or create another state-owned enterprise.

This article presents the technical diagnosis of that institutional flaw, grounded in primary documents from the Federal Senate, the Chamber of Deputies, and the Federal Court of Accounts (TCU), and provides a complete Complementary Law draft to establish symmetrical technical safeguards.

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1. Fiscal asymmetry: maximum rigor to cut taxes, open door to raise them

Today, if a lawmaker introduces a bill to lower a tax rate on food, machinery, or payroll, the proposal faces two immediate legal walls:

1. Article 113 of the Transitional Constitutional Provisions Act (ADCT), enacted by Constitutional Amendment 95/2016: requires any bill that waives revenue to include a formal estimate of its budgetary and financial impact. Without that calculation, the Supreme Federal Court (STF) strikes down the law as formally unconstitutional (ADIs 6357/DF and 7372/PE and ADPF 662).
2. Article 14 of Complementary Law 101/2000 (Fiscal Responsibility Law, LRF): requires any tax relief to be accompanied by immediate offsetting measures, often forcing increases in other taxes.

What happens when the movement goes the other way, when the government issues a Provisional Measure or a bill to raise taxes?

There is no symmetrical legal requirement. The Executive Branch is not required to submit a statement proving it has exhausted cuts in discretionary spending or inefficient subsidies before raising taxes. Nor is it required to present an independent technical opinion measuring how many formal jobs and how many billions in private investment will be destroyed by the higher tax burden.

Research from the Federal Senate Legislative Consultancy, notably Discussion Paper (TD) No. 348 (June 2025), which mapped federal revenue-raising measures from 2023 onward, and TD No. 354 (September 2025) on Ex Ante Legislative Impact Analysis, documents that hundreds of tax articles and revenue-raising Provisional Measures were approved without any prior official micro- or macroeconomic impact study.

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2. The state-owned enterprise inside another state-owned enterprise: the "zero-cost" fiction

The second major loophole lies in the creation of state-owned enterprises and subsidiaries. Between November 2024 and January 2025, Congress approved Bill No. 3,819/2024, enacted as Ordinary Law No. 15,083/2025:

• The law authorized the creation of the aerospace state-owned enterprise Alada, structured as a subsidiary of the state-owned enterprise NAV Brasil (effectively a state-owned firm created inside another state-owned firm).
• The bill was fast-tracked and passed in a single round in the Chamber of Deputies by 364 votes to 47, despite warnings regarding overlapping duties with the Brazilian Space Agency (AEB), ANAC, and private aerospace manufacturers.
• The most alarming procedural fact: the opinion issued by the Finance and Taxation Committee (CFT) formally declared that creating a new federal state-owned enterprise had "no budgetary or financial implication".

That procedural loophole allows the creation of public companies under the accounting fiction of immediate fiscal neutrality, shifting capitalization costs, executive payroll, and Treasury subsidies to future budgets.

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3. Why Brazil has no margin left for unvetted fiscal expansion

Operating without technical admissibility gates for tax hikes and new state-owned companies is unsustainable given Brazil's verified macro-fiscal indicators in 2026:

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4. The constitutional engineering solution: Article 164-A, IFI, and TCU

To pass constitutional muster in the Constitution and Justice Committee (CCJ), a Complementary Law cannot hand an absolute political veto to an external body. Instead, it must establish the technical report as a mandatory admissibility requirement within the legislative budget process, anchored in Article 164-A of the Federal Constitution (inserted by Constitutional Amendment 109/2021) and Article 163, item VIII (debt sustainability).

The proposal activates two independent state institutions:

1. Independent Fiscal Institution (IFI), created by Senate Resolution No. 42/2016, governed by a non-partisan board with fixed terms, working alongside the Budget Consultancies of both Houses of Congress.
2. Federal Court of Accounts (TCU), whose jurisprudence (Session Minute No. 663/2002) already requires prior technical and economic feasibility studies for creating public companies under Article 173 of the Constitution and Article 2 of Law 13,303/2016.

What the Complementary Law changes in practice

• Gate 1 (New Art. 14-A in the Fiscal Responsibility Law): No bill or Provisional Measure that increases the gross tax burden as a share of GDP may be admitted without:
  1. Spending Efficiency Exhaustion Statement, proving why the fiscal target could not be met by cutting discretionary administrative costs, reviewing unproven tax subsidies (while preserving targeted anti-poverty transfers), or divesting idle public assets;
  2. Ex Ante Economic Impact Opinion from the IFI, measuring the effect on private investment, formal employment, and debt sustainability.
• Gate 2 (New §§ 4 to 6 in Art. 2 of the State-Owned Enterprises Law, Law 13,303/2016): Explicitly bans declaring budgetary neutrality when creating a state-owned company or subsidiary, requiring a prior conclusive opinion from the TCU and the IFI proving an insurmountable market failure, zero overlap with existing agencies, and multi-year financial self-sufficiency without Treasury operating subsidies.

Good decisions have numbers, deadlines, and owners.