SELECTIVE TAX AND PIGOUVIAN TAX: EXTRAFISCALITY AND THE INCONSISTENCIES OF COMPLEMENTARY LAW Nº 214/2025

Abstract

This study analyzes the Selective Tax (IS), instituted in Brazil by Constitutional Amendment No. 132/2023 and regulated by Complementary Law No. 214/2025, in light of the Pigouvian Tax theory. It is argued that the IS represents the legislative materialization of the Pigouvian concept, aiming to correct negative externalities through the taxation of goods and services harmful to health or the environment. However, it is shown that, by inheriting its conceptuais basis, the Brazilian tax also inherits the criticisms and practical challenges inherent to its application, such as the difficulty in measuring social damage and in accurately identifying the source of the externality. Finally, the article highlights controversial taxable events in the aforementioned Complementary Law, such as the taxation on mineral extraction, which suggest a possible deviation from its extra-fiscal purpose towards a merely revenue- collecting objective, compromising the tax's effectiveness as a regulatory policy instrument.