Impact of the principle of environmental protection on tax legislation

Abstract

The inclusion of the principle of environmental protection in Brazilian tax legislation through Constitutional Amendment n° 132/2023 has introduced new challenges and opportunities in the use of extrafiscal taxes, such as environmental fees and selective taxation, to promote sustainable practices. The socio-legal approach adopted in the research allows for an assessment of the impacts of this change, considering the overlap of competencies among federative entities, the need for balance between revenue collection and sustainability, and the regulatory function of extrafiscality. The incorporation of the environmental principle into the tax system strengthens the use of fiscal instruments for ecological purposes, consolidating extrafiscality as a mechanism for economic regulation. However, regulatory gaps still create legal uncertainty, especially regarding the risk of double taxation and the lack of clarity in the distribution of competencies. The Tax Reform prioritized the penalization of environmentally harmful activities without establishing effective mechanisms to encourage sustainable behaviors, resulting in a punitive bias in environmental tax policy. The effectiveness of the new tax structure will depend on harmonizing revenue collection, legal security, and the promotion of sustainable development. Improving the regulatory framework and ensuring coordination among federative entities are essential to enabling environmental taxation to fulfill its potential as an incentive and control instrument, achieving a balance between fiscal restrictions and the encouragement of environmentally responsible practices.