Income as Profit

a Proposal for Analyzing Income Tax Founded on the Constitution and the National Tax Code (CTN)

Abstract

In Brazilian tax doctrine, income is predominantly conceived as an accretion to wealth (increase in net worth). However, accepting income as patrimonial accretion entails that, absent accretion, no income tax would be due and, conversely, whenever accretion occurs, it would. Yet, on the one hand, within a given period there may be no accretion because the income has been consumed, and, on the other, there may be accretion arising from random and fortuitous events – such as inheritance, donation, and assets found – which does not give rise to an income tax obligation. Thus, both situations – the first, being subject to income tax even without accretion; the second, an accretion without tax liability – falsify the conception of income as patrimonial accretion. In its place, the idea is advanced that, for purposes of the tax at issue, income should be understood as “profit,” taking the term in a broad sense.