effective gross profit of at least 60 percent on the raw materials participation in the sale price of finished goods. This requirement runs highly over the average gross profit margin effectively achieved by Brazilian companies that mport from related parts, as recently emphasized through specialized research. This interpretation can be better understood through the illustration on this PRL in lay (B)Total Sales Costs of material: RS 35 inished Goods: RS 90 ) Net Sale Price (C)Value Added (E) Profit Margin Bas (B-A) RS 55 D-CK RS &5 (F)Profit Margin PRL in regulation RI 243/02 (B) Total Sales Costs of Material: RS 35 Finished goods: I D) Net Sale Price: (F)Profit Margin ment(AGK If Aso Not in accord with the terms of the law, the new regulation does not take the value added in the country(C, first diagram) into account to compute the gin(F), which is computed dir (E, second diagram), thus representing greater impact on the parameter price (G) Moreover, the parameter price(G)that by law was inversely proportional to the value added in the country(C, first diagram) encourages companies to substitute imports by products manufactured in Brazil. This was left aside by the new instruction. If, however, the apparent intent of the law was to foster manufactured products' nationalization, to enable implementation of new plants, to easy transfer of technologies to Brazil, and to create jobs, the opposite can be said about the tax authorities ruling The prevalence of the law over the administrative ruling seems to be evident, since the first stage is hierarchically higher than the second, i.e., laws of documenting each transaction of each product, as requested by the lak ?g altered only by equally ranke the ruling ' s instruction may cause discomfort to taxpayers. The managem and making strategically attention to avoiding adjustments at the end of the not have the certainty of knowing exactly what revenue authorities want in y fiscal year is already a huge work. In addition, even doing this, taxpayers maeffective gross profit of at least 60 percent on the raw materials participation in the sale price of finished goods. This requirement runs highly over the average gross profit margin effectively achieved by Brazilian companies that import from related parts, as recently emphasized through specialized research.14 This interpretation can be better understood through the illustration on this page.15 PRL in law PRL in regulation RI 243/02 Not in accord with the terms of the law, the new regulation does not take the value added in the country (C, first diagram) into account to compute the gross profit margin (F), which is computed directly on the prorated sale value (E, second diagram), thus representing greater impact on the parameter price (G). Moreover, the parameter price (G) that by law was inversely proportional to the value added in the country (C, first diagram) encourages companies to substitute imports by products manufactured in Brazil. This was left aside by the new instruction. If, however, the apparent intent of the law was to foster manufactured products' nationalization, to enable implementation of new plants, to easy transfer of technologies to Brazil, and to create jobs, the opposite can be said about the tax authorities' ruling. The prevalence of the law over the administrative ruling seems to be evident, since the first stage is hierarchically higher than the second, i.e., law's dispositions may be altered only by equally ranked instruments.16 Regardless, the ruling's instruction may cause discomfort to taxpayers. The management of documenting each transaction of each product, as requested by the law, and making strategically attention to avoiding adjustments at the end of the fiscal year is already a huge work. In addition, even doing this, taxpayers may not have the certainty of knowing exactly what revenue authorities want in (B) Total Sales Costs of Finished Goods: R$ 90 (A) Cost of Imported Raw Material: R$ 35 (D) Net Sale Price: R$ 140 (F) Profit Margin (Ex60%): R$ 33 (G) Parameter Price (E-F): R$ 22 If A>G, adjustment (A-G); if A<G, no adjustment (C) Percentage of (A) in (B): (B/A) 39% (E) Participation of (A) in the Sale Price: (CxD) R$ 55 (C) Value Added (B-A): R$ 55 (B) Total Sales Costs of Finished Goods: R$ 90 (A) Cost of imported raw material: R$ 35 (D) Net Sale Price: R$ 140 (E) Profit Margin Basis (D-C): R$ 85 (F) Profit Margin (E*60%): R$ 51 (G) Parameter Price (D-F): R$ 89 If A>G, adjustment (A-G); if A<G, no adjustment