Rare Earth Elements and the Selective Tax:

Environmental Protection Versus Strategic Development in Brazil After the Tax Reform

Resumo

The Brazilian tax reform, introduced by Constitutional Amendment 132/2023 and detailed by Complementary Law 214/2025, established the Selective Tax (Imposto Seletivo—IS), a federal levy with an explicit extrafiscal purpose aimed at protecting human health and the environment. The scope of the tax’s incidence presents no major legislative definition complexities when the harmfulness of the taxed good is clear and does not conflict with other constitutional values of equivalent weight—as is the case with tobacco, alcoholic beverages, and fossil fuels. This article examines what happens when that condition is absent, using rare earth elements as a paradigmatic case. Rare earths—a group of chemical elements indispensable to the energy transition, national defense, and the development of artificial intelligence—present documented negative environmental and health externalities while simultaneously generating major positive strategic and technological externalities. Brazil holds the world’s second-largest reserves of these minerals yet produces only a marginal fraction of its potential. Annex XVII of Complementary Law 214/2025 excluded rare earths from the scope of the IS without the explanatory memorandum stating the criterion for that omission. The article argues that this absence of explicit legislative justification is not merely a formal issue, as it may undermine the normative rationality of the system, exposing the sector’s tax regime to avoidable interpretive vulnerabilities.