Fernando Colucci and Alexia Costa Polloni
The problem of gender inequality in taxation has gained greater visibility in the legal universe. There are several forms of taxation that mainly affect women.
In early June, the Federal Supreme Court (STF) ruled the Direct Action of Unconstitutionality 5,422, filed by the Brazilian Institute of Family Law (IBDFAM), which questioned the constitutionality of the alimony taxation. Not only does this type of taxation aggravate the gender inequality scenario, but it also compromises the primary goal of the right to alimony, which is to ensure a life with dignity to those who cannot provide it for themselves.
In a decision taken in plenary, the Supreme Court ruled the action well founded and declared unconstitutional the taxation of alimony arising from family law, excluding from the scope of assessment the maintenance support due for other reasons – such as those arising from civil wrongdoing.
Interpretation was given in accordance with the Federal Constitution to Section 3, §1, of Law 7,713/88;[1] Sections 4[2] and 46[3] the Annex to Decree 9,580/18; and Section 3, caput and §1[4] and §4[5] Decree-Law 1,301/73.
To understand the impacts of this form of taxation and the consequences of the Supreme Court's decision, it is necessary to highlight some essential characteristics of the family law alimony – its objective, its subjects and its way of quantification – before dealing with the tax legislation challenged by the direct action of unconstitutionality.
Characteristics of the right to alimony
In family law, the main objective of the alimony is to guarantee a life with dignity, citizenship and freedom to those who do not have the means to provide their own livelihood.[6] The maintenance allowance should enable access to universal rights, such as education, food, clothing, leisure, health and housing, preserving the living standard of those who receive it.[7]
In technical terms, in relation to the subjects involved, there are two parties involved in this legal relationship: a creditor and a debtor. While the creditor receives the alimony, the debtor pays for it.
According to the most recent data released by the Brazilian Federal Revenue, approximately 97.5% of pensions declared in the calendar year 2020 for the purposes of Personal Income Tax (IRPF) were paid by men.[8]
The last statistical survey conducted by the Brazilian Institute of Geography and Statistics (IBGE) in 2019 revealed that the custody of underage children was granted unilaterally to women in 61.8% of divorces. To husbands, in only 4.1% of cases.[9]
These data indicate that men mainly occupy the debtor position, while the creditor position is occupied by women and their children. Despite the diversity of family arrangements that can be contemplated in the obligation to provide maintenance, the reality of the subjects involved is much more restricted. The arrangements are limited to: men as debtors, and women as creditors or as legal guardians of the creditors – which are the children of whom they have custody.
The quantification of the support should, in theory, comply with the trinomial need/possibility/proportionality, considering the need of the creditor and the possibility of the debtor, according to Section 1,694, §1 of the Civil Code.[10]
Necessity arises when the creditors do not have sufficient means to provide livelihood for themselves. The possibility exists when the debtor is able to provide the maintenance of the creditor, without harming its own livelihood. Proportionality determines the balance between these two factors.
There is an important aspect in the maintenance allowance quantification directly related to gender inequality. Even if the woman is entitled to receive the support, the arbitrated amount does not usually dampen the fall in their standard of living after a divorce.[11] It is common for women's needs to be valued with excessive caution: the value set is usually not enough to guarantee the life with the dignity promised by the provision.
According to IBGE, women dedicate themselves to the care of the home and those who inhabit it twice as many hours as men.[12] This domestic and affective work performed by women is devalued[13] and disregarded when quantifying the support.
It is by this scenario that the alimony taxation is supported.
Taxation of alimony
Law 7,713/88 determines the incidence of IRPF on the value of perceived support paid in cash. On the one hand, pursuant to Section 3, §1 of that law, the Received alimony should be part of the IRPF calculation basis. On the other hand, pursuant to Section 12a, §3, I[14] of the same law, the values Paid as alimony may be deducted from the basis for calculating the tax, when the support is the result of compliance with a court decision, an agreement approved by law or consensual separation or divorce made by public deed.
Before the Supreme Court decision, the alimony taxation was completely paid by the creditor. The debtors, in turn, could enjoy a tax benefit, deducting from the calculation basis of the IRPF the amounts paid as alimony.
Given that women – more specifically mothers who hold custody of their children after divorce – occupy, in the overwhelming majority, the direct or indirect creditor position, it is clear that they are more tax-charged.
These women could pay the tax in two ways, pursuant to Section 4, single paragraph, of Decree 9,580/18:
- As creditors, declaring and paying the IRPF on the pension amounts they receive in their own name; or
- As legal guardians of the creditors – their children, who receive the support – placing them as dependents in their statement and paying the IRPF on the amounts received by them.
Women, therefore, supported the financial burden of the tax payment, using part of the alimony – or their income itself – which should be intended to pay the children's expenses.
The negative impacts of the taxation extinguished by the Supreme Court
It does not take much to identify the gender inequality perpetuated by this form of taxation: the tax burden was concentrated on the creditor and, given that this position is occupied mostly by women, the entire financial burden of the tax payment used to fall on them.
However, this is not the only negative impact of the alimony taxation that was extinguished by the Supreme Court decision of unconstitutionality.
The taxation of amounts received as alimony, because they are not considered at the time of the quantification of the support, further reduced these amounts, which are usually already insufficient to cover the expenses of the wife and children after a divorce. Through this form of taxation, the party that was recognized to be in need was subjected to the payment of the tax, while the opposing party enjoyed a deduction benefit.
The proportionality, therefore, was not at all balanced, sacrificing women’s need in benefit of men’s possibility. Consequently, one of the parties of the supporting allowance relationship was at a clear disadvantage compared to the other.
The Supreme Court decision suppressed another impact: non-compliance with the alimony’s main objective. The jeopardy of part of the support for IRPF payment and the non-recognition of the costs faced by women with domestic work drastically reduced the value of the pension that could effectively be used to ensure the education, food, clothing, leisure, health and housing of the creditors.
Although indirectly, the disproportionality in the quantification of the alimony and the failure to comply with its main objective ended up increasing gender inequality. The need of women who asked for alimony was further aggravated, intensifying their position of disadvantage in relation to men.
The Supreme Court decision, therefore, removed from our legal system a form of taxation that not only deepened gender inequality, but put at risk the essence of the institute on which it relied.
The interpretation given by the Supreme Court to Law 7,713/88 and its corresponding decrees, in the analysis of the Direct Action of Unconstitutionality 5,422, helped to reduce the impact of gender inequality on taxation and on the alimony itself. The trial restored much of the proportionality in the alimony and paved the way for the satisfaction of its main purpose.
Although there are still several other issues related to gender inequality that need to be addressed in the Brazilian legislation, the Supreme Court's decision is an extremely important milestone for this necessary change in our legal system.
[1] Law 7,713/88, Section 3: "The tax shall be levied on gross income, without any deduction, with the prohibition of the provisions of the arts. 9th to 14th of this Law. §1 - The entire proceeds of capital, work or combination of both, maintenance and pensions perceived in cash, and also income of any kind, thus also understood are the capital increases not corresponding to the declared income".
[2] Annex to Decree 9,580/18, Section 4: "In the event of perceived income in cash by way of maintenance or pensions in compliance with a judicially approved agreement or judicial decision, including provisional or provisional maintenance, verified the civil incapacity of the creditor, the taxation will be made on his behalf by the guardian, the trustee or the person responsible for his custody (Decree-Law 1,301/73, Section 3, § 1, and Section 4).
Single paragraph. Optionally, the person responsible for the maintenance of the creditor may consider it its dependent and include its income in its statement, even if in values below the limit of the first range of the annual progressive table (Law 9,250/95, Section 35, caput, items III to V and VII)".
[3] Annex to Decree 9,580/18, Section 46: "The amounts perceived, in cash, by way of maintenance or pensions, in compliance with a court decision, in an agreement approved by judicial or public deed registered in a notary's office, including the provision of provisional maintenance (Law 5,172/66 – National Tax Code, Section 43, § 1; Decree-Law 1,301/73, Section 3 and Section 4; and Law 7,713/88, Section 3, § 4)".
[4] Decree-Law 1,301/73, Section 3, caput and § 1: "The net alimony or pensions perceived in cash constitute taxable income, classifiable in the "C" Form of the income statement of the creditor, which will be taxed distinctly from the feed. § 1 - In the case of civil incapacity of the creditor, he shall be taxed in the form of this section, and the income statement must be made on his behalf by the guardian, curator or guardian".
[5] Decree-Law 1,301/73, Section 4, §4: "The provisions of Sections 2 and 3 also apply to cases of provision of provisional or provisional maintenance".
[6] DIAS, Maria Berenice. Family Law Handbook. 4. Ed. São Paulo: Editora Revista dos Tribunais Ltda., 2016. Electronic book. p. 910.
[7] TARTUCE, Flavius. Civil Law: family law. 14. ed. Rio de Janeiro: Editora Forense Ltda., 2019. Electronic book. p. 788.
[8] Brazilian Federal Revenue - Large IRPF Numbers: calendar year 2020, financial year 2021
[9] IBGE - Civil Registry Statistics - 2019. Table 5.8. Vital Statistics System
[10] Civil Code, Section 1,694. Relatives, spouses or partners may ask each other for the support they need to live in a manner compatible with their social condition, including to meet the needs of their education. § 1 - Maintenance shall be fixed in proportion to the needs of the complainant and the resources of the obliged person.
[11] OLIVEIRA, Ligia Ziggiotti de. Feminist Views on Contemporary Family Law. 2. Ed. Rio de Janeiro: Lumen Juris, 2020. p. 128.
[12] IBGE - National Survey by Continuous Household Sample: other forms of work 2019
[13] OLIVEIRA, Ligia Ziggiotti de. Feminist Views on Contemporary Family Law. 2. Ed. Rio de Janeiro: Lumen Juris, 2020. p. 126.
[14] Law 7,713/88, Section 12a. §3: "The basis of calculation shall be determined by deducting the following expenses related to the amount of taxable income: I – amounts paid in cash as alimony in the face of family law rules, when in compliance with a court decision, a court-approved agreement or a consensual separation or divorce made by public deed; e (...)"
