Law firms defrauded over R$ 100 million in ICMS per month in São Paulo and used fake auditors to deceive companies, tax authority says

Brazilian tax authorities in São Paulo state, in coordination with the Civil Police, the State Treasury Secretariat, and the Public Prosecutor's Office, held a press conference on Wednesday (15) regarding 'Operation Distrato,' which uncovered a scheme where law firms defrauded over R$ 100 million (approximately $20 million) per month in ICMS (state VAT) credits. The firms approached large companies offering 'tax planning' services and sold fake tax credits from bankrupt companies or using forged documents. The investigation involved multiple agencies and highlights a significant tax fraud operation targeting the state's revenue.

Global Impact

Economically, the fraud undermines state revenue in Brazil's largest economy, potentially forcing spending cuts or tax hikes that could slow regional growth. Politically, it erodes trust in the tax system and may prompt federal-level reforms to ICMS, a notoriously complex tax.