Ruling reaffirms legislative discretion in tax design, even when fundamental rights are involved
In a unanimous decision, Brazil’s Federal Supreme Court (STF) upheld the constitutionality of limits on deductions for educational expenses in personal income tax returns (IRPF) for the tax years 2012 to 2014. The case was brought by the Brazilian Bar Association (OAB) through Direct Action of Unconstitutionality (ADI) No. 4927, with Justice Luiz Fux serving as the rapporteur.
The Court rejected claims that the cap on deductible education expenses violates constitutional principles such as ability to pay, prohibition of confiscation, human dignity, and the right to education. Instead, the ruling confirms the legislature’s autonomy in balancing fiscal policy with social rights.
The Legal Challenge: Does the Right to Education Justify Unlimited Tax Deductions?
The OAB argued that the right to education, as guaranteed under Article 6 of Brazil’s Constitution, combined with the principles of family protection and human dignity, should prevent the government from limiting the deductibility of education-related expenses.
According to the petition, the deduction cap disproportionately affects middle-class families who lack access to quality public education and therefore rely on private schools. The OAB also pointed to Article 150, VI(c) — which grants tax exemptions to nonprofit educational institutions — as evidence that the State cannot fully ensure educational rights and thus should extend tax relief to individuals who pay out of pocket.
The STF’s Response: Fiscal Limits and Legislative Discretion
In his opinion, Justice Fux acknowledged the social importance of education, which is a shared responsibility of the State, families, and civil society. However, he emphasized that this does not imply a constitutional requirement for unlimited tax deductions.
Fux explained that deductions for educational expenses are a legislative policy choice, not a constitutional entitlement. As such, Congress has the legitimate authority to define the scope and limits of these incentives, in line with broader fiscal needs — including the funding of public education itself.
He also warned that removing the cap could have regressive consequences, disproportionately benefiting higher-income taxpayers while reducing the tax base that supports public services. In his words, “The practical consequence of the OAB’s argument could be the weakening of public education — the very right it seeks to protect.”
Broader Fiscal and Legal Implications
The decision sends a strong signal about the hierarchy of tax principles in Brazil. While rights like education are protected by the Constitution, they do not override the principles of tax legality and fiscal responsibility.
The ruling also contributes to legal certainty by confirming the validity of tax rules applied in previous years, reducing ambiguity for taxpayers and tax administrators alike.
From a policy standpoint, the STF embraced a holistic view of constitutional rights — one that balances individual entitlements with the State’s ability to sustain public programs. It reinforced the idea that tax expenditures must be designed with long-term equity and fiscal sustainability in mind.
Final Thoughts: A Victory for Fiscal Balance and Legislative Authority
The outcome in ADI 4927 reaffirms that fundamental rights must be interpreted in harmony with other constitutional values, including budgetary constraints and equal treatment under the tax system. It also highlights the need for taxpayers and legal professionals to consider the structural role of tax laws, rather than interpreting tax reliefs as direct extensions of social rights.
For tax practitioners, the decision is a reminder that legislative policy choices in taxation — even those touching on sensitive areas like education — are presumed valid as long as they meet constitutional thresholds for fairness and legality.
In summary, the STF upheld Congress’s right to limit education-related tax deductions, recognizing this as a fiscally responsible and constitutionally sound measure that does not diminish the State’s commitment to the right to education.