Carf has a trillionaire inventory of processes – 01/27/2023 – Market

The attempt to avoid billionaire losses for the Union in tax discussions ended up generating a trillionaire stock of lawsuits awaiting judgment at CARF (Administrative Council of Tax Appeals).

The value of the causes under discussion in the council grew by more than 60% in the last three years and surpassed the mark of R$ 1 trillion, although the number of accumulated processes has fallen by around 20%.

Three factors explain these changes, according to lawyers and the government itself. In April 2020, the rule came into force that ended the casting vote by a representative of the Tax Authorities in cases that ended in a tie in the council.

At the same time, because of the pandemic, Carf sessions were suspended and, when they returned, the court placed a limit on the amount of cases that could be tried remotely.

As the government itself admitted, the purpose of the limitation was to avoid a decision against the Treasury in a process of great value, since the Union could no longer count on the casting vote.

The value judged by Carf plummeted from an average of BRL 428 billion in 2018 and 2019 to an annual average of BRL 89 billion from 2020 onwards.

Major causes were only judged again in 2021. The following year, a third factor appeared: the stoppage of Revenue officials. The annual average of analyzed cases dropped from 32,000 from 2018 to 2021 to just 6,320 in 2022, according to Carf data up to October.

“The responsibility for the Carf stock or, even, for the slowness, and even unfairly call into question the impartiality of its members cannot be attributed to the directors who have been elected by the taxpayers”, says Aconcarf, association of the representatives of the taxpayers in the council .

After the publication of the provisional measure that brought back the casting vote by the government representative, CARF guided a series of high-value judgments with controversial cases within the court, which resumes sessions in February.

Although the pro-taxpayer tiebreaker has been used in less than 2% of cases since 2020, there has been a change in case law in the body on relevant topics, such as taxation of profits and Brazilian companies that have subsidiaries abroad and goodwill on the acquisition of equity interest — topics who now return to the debate.

Jabuticaba

When announcing the return of the casting vote, the secretary of the Federal Revenue, Robinson Barreirinhas, stated that no relevant country has a structure with three instances for administrative appeals against tax assessments.

He cited studies showing that, out of 28 countries, most of them in the OECD, 81% have only one administrative instance, and 19% have two. Most of these courts have only people from the tax administration as judges.

The exceptions are Denmark and Finland, which have taxpayer representatives, but who are not appointed by business associations, as in Brazil. Norway has representatives from the private sector, but the local tax authorities can go to court in case of defeat.

In Brazil, taxpayers are represented by lawyers appointed by employers’ or workers’ confederations (in social security cases), who need to go through a selection process by Carf itself, are prohibited from advocating and are remunerated by the government for their role.

According to tax experts, the CARF is a technical body and the impartiality of decisions can be seen in the high percentage of cases that end without a tie.

Roberto Justo, partner at Choaib, Paiva e Justo Advogados, agrees that Carf is an exception on the international scene, but sees the court as necessary in a country with a complex tax system, trillionaire litigation and a high level of dispute between taxpayers and tax authority.

He and partner Marcos Paiva claim that the analyzes of appeals at the Federal Revenue Judgment Offices are 99.9% against taxpayers, while CARF has a high percentage of decisions in which the Treasury and representatives of the private sector vote in line. “It needs to have a body that will judge impartially”, says Paiva.

Carf was created in 2009 from the unification of the taxpayer councils, a structure with almost 100 years of operation. In 2015, it was the target of Operation Zelotes by the Federal Police, which led the government to impose new rules for choosing its members.