Brazil's tax reform likely to spark surge in litigation

Brazil's long‑awaited tax reform, structured as a dual VAT with a heavily concentrated selective tax, has drawn criticism for its limited prospects of genuine simplification. The Superior Tribunal de Justiça (STJ) created a working group, led by Minister Regina Helena Costa, which warned that the new taxes could potentially triple consumption‑related lawsuits. Early court decisions, such as a preliminary injunction granted by the Distrito Federal Court to a group of companies, illustrate how early litigants may gain a more favorable legal environment.

The reform's design reflects Brazil's highly fragmented fiscal system, with 26 states, a federal district and over five thousand municipalities each possessing autonomous tax authority. Experts suggest that alternative dispute mechanisms, notably tax arbitration modeled after Portugal’s CAAD system, could help mitigate the expected increase in judicial disputes.

Overall, the reform is expected to intensify legal uncertainty rather than deliver the promised simplification, prompting calls for faster, specialized conflict resolution methods.