Brazil’s Senate on Tuesday unanimously approved a bill defining “chronic tax debtors,” targeting companies that repeatedly and intentionally dodge taxes as a business strategy.
The bill was introduced in 2022 but only gained momentum last month after investigators uncovered money laundering and fuel tax fraud schemes linked to the Primeiro Comando da Capital (First Command of the Capital, or PCC), widely considered Brazil’s most powerful criminal organization.
The measure requires tax authorities to open a streamlined administrative case against flagged companies, giving them 30 days to settle debts — either in full, in installments or with guarantees. If they do not, they can be placed on special registries and barred from bidding on public contracts, filing for bankruptcy protection, or obtaining certain permits. In severe fraud cases, presenting a defense no longer pauses the process.
“A chronic debtor is not to be confused with a taxpayer facing temporary financial difficulties or a one-off default,” said Senator Efraim Filho, the bill’s rapporteur. “The chronic debtor acts with intent … engaging in clear unfair competition with those who meet their tax obligations.”
At the federal level, companies will qualify as chronic debtors if they owe more than BRL 15 million in unpaid taxes that exceed 100% of their declared assets. For states and municipalities, the standard focuses on repeated, unjustified arrears across several filing periods.
👉 Why it matters. Efraim Filho cited a Federal Revenue Service study showing that 1,200 companies amassed BRL 200 billion (around USD 37 billion) in unpaid taxes over the past decade. He noted that the government would not be able to recover the BRL 200 billion (as these companies are under dummy ownership or already shuttered), but argued that the bill could curb such practices in the future.
The bill pairs sticks with carrots. It creates compliance programs to reward “good taxpayers” with faster service, more flexibility to post or swap guarantees ahead of potential disputes, priority in administrative proceedings and, in some cases, bonuses reducing lump-sum payments by up to 3%.
The goal, senators argue, is to cut litigation, improve transparency and nudge borderline actors into the formal economy, while isolating those who use evasion to undercut their rivals.
Business groups have long argued that persistent nonpayment erodes lawful competition by allowing bad actors to pocket tax outlays and sell at artificially low prices, especially in the fuel distribution sector.
The bill attempts to address this concern while preserving due process: it outlines specific circumstances that exempt a firm from being labeled a “chronic” debtor, such as officially recognized disasters or consecutive negative financial results without indications of fraud. It also narrows avenues to halt foreclosure when authorities suspect shell structures, straw owners, fictitious addresses or links to illegal goods.
“Brazil must also strengthen the management of its outstanding tax debt through greater investment that would allow public attorneys to prioritize recoverable credits, as well as new rules to facilitate asset seizures,” Vicente Braga, president of Anape, the national association of state attorneys, told The Brazilian Report.
Sophia Santos-Pearcy contributed.
