Carf: Change in vote requires conditions, says rapporteur – 06/14/2023 – Market

One of the main measures in Minister Fernando Haddad’s (Finance) package to try to rebalance the public accounts, the resumption of the so-called casting vote in CARF (Administrative Council of Tax Appeals), will only be possible upon negotiation of conditions. The statement was made by the rapporteur for the bill on the subject, Deputy Beto Pereira (PSDB-MS), in an interview with Sheet.

CARF is the administrative court that judges billionaire cases of dispute between the Union and taxpayers on the payment of taxes. The casting vote is the instrument that, in the event of a tie in the votes, gives the president of the collegiate (appointed by the Ministry of Finance) decision-making power.

The quality vote was overthrown in 2020 by Congress, increasing the Union’s losses in the court-which already served as a maneuvering instrument for large companies to postpone the collection of tributes for years.

The resumption of the instrument is one of Haddad’s flags to expand the federal government’s sources of revenue, in view of the goals of reducing the gap in the accounts this year and zeroing the deficit in 2024.

“The casting vote is only likely to return if it has conditions”, says Pereira, who was appointed rapporteur for the matter on Monday (12) and has already had meetings with Haddad and with representatives of Abrasca (Brazilian Association of Listed Companies), one of the active entities in the discussion. “It won’t be a loose casting vote.”

In February, the Treasury, Abrasca and the OAB (Ordem dos Advogados do Brasil) even sealed an agreement around the resumption of the casting vote, which freed taxpayers from fines and gave discounts on interest in the event of a tie in the judgment in Carf.

The companies’ argument was that the scoreboard indicated the existence of controversy over the charge, which should exempt companies from the penalty (fine) —a kind of benefit of the doubt. Haddad stated in April to the Sheet that he would no longer give in on the Carf case after closing the deal.

The solution was initially criticized by parliamentarians and by the mayor, Arthur Lira (PP-AL), for having been agreed between entities that do not have the competence to legislate on the subject — a task that falls to “those who have a vote”, according to these criticisms .

Now, there is good will to analyze the signed terms, although there is no guarantee of full incorporation. According to the rapporteur, the logic of granting some type of benefit can be a way out. “It may have a benefit for those who reached the casting vote,” he says.

Another option, says Pereira, is to provide for a tie-breaking rule by expanding the collegiate body. He cites the example of the CPC (Code of Civil Procedure), which provides for the judgment of some types of appeals by a panel of three judges, expanding to five if the first vote is not unanimous.

Upon being assigned to the post, the rapporteur spoke with Lira. According to Pereira, the President of the House wants to “rebalance” the Carf — which, in the pre-2020 format, was seen as pro-Tax and, without the casting vote, was only pro-taxpayer, according to him. The rapporteur assesses that it is no longer taboo in Congress to discuss the resumption of the instrument overthrown by the parliamentarians themselves.

Pereira also intends to revise the proposal to raise the minimum amount in dispute to one thousand minimum wages (R$ 1.32 million) for the taxpayer to be able to resort to Carf. Today, this limit is 60 minimum wages (R$ 79.2 thousand).

There is an assessment that the change may limit the ability of taxpayers to question infractions launched by the Federal Revenue at the administrative level. Therefore, the rapporteur intends to reassess this passage.

Another point considered a “pillar” in the discussions is the so-called “compliance classification”, an initiative included in the project that authorizes the Revenue to stop punishing taxpayers who have a kind of good tax payer seal, if they momentarily fail to comply with any obligation with the Tax Authorities.

The government’s idea is that the concept of compliance be based on criteria such as the regularity of registration and collection of taxes, accuracy of the information provided, among other items defined by the Revenue.

Pereira assesses that it is necessary to “make it clearer” what the criteria are, although he has not yet defined how this will be done in his opinion.

The appointment of the rapporteur and the consequent signaling of progress in Carf’s agenda mean a change in relation to previous predictions by congressmen and the Treasury itself, that the project could be stalled in the Chamber. Haddad’s good relationship with Lira, however, has contributed to unlocking the economic agenda.

Initially, the proposal had been sent by the Lula government (PT) through an MP (provisional measure). Faced with the deadlock on the rite of processing the MPs and with the risk of losing validity, the matter was transformed into a bill with an urgency regime. With that, she locks the House’s voting agenda from next Wednesday (21).

Despite the attempt to vote on the text by that date, leaders recognize difficulties in following the schedule, since the rapporteur will still meet with the benches and will have to build a text that is consensual.

In addition to the time for discussion of the proposal, Lira should stay out of the Chamber on a trip between the 22nd and 29th. Therefore, the Mayor asked the rapporteur for the text to be voted on before that.

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Understand Carf

• What is Carf? Administrative court that decides in second and third instance disputes between government and taxpayers over tax payments.
• What is the vote quality? Power of a government representative to decide the judgment (for or against the taxpayer) in case of a tie.
• What was done in 2020? The casting vote was abolished, meaning that ties would automatically give taxpayers a win. The government talks about an annual loss of BRL 59 billion with the measure.
• What did the Lula government decide in January? The government sent an MP (provisional measure) to Congress recreating the casting vote, with immediate effect. The initiative needs to receive congressional approval within four months in order not to lose its validity.
• What did the government negotiate after from that? The Ministry of Finance and representatives of the companies reached a compromise with a kind of “regulation” of the casting vote: in the event of a tie, the collection of the principal amount of the debt would remain, but fines and interest would fall (as long as the debt is settled at the administrative level).
• How is the situation in Congress? There are reports of resistance from parliamentarians. Among the justifications is the fact that Congress has already deliberated on the subject in 2020. The fight between the Chamber and the Senate over the rite of MPs has complicated the scenario. Therefore, the government agreed to transform the MP with the Carf changes into a bill – which is now under discussion.