Carf judges highest value in four years – 01/04/2024 – Market

Despite having operated precariously in 2023, Carf (Administrative Council of Financial Resources) closed last year with the best result in terms of values ​​judged since 2019.

According to preliminary data, there were R$230 billion in tax actions analyzed from January to September. Last year was marked by the cancellation of sessions, strikes by tax auditors and a back-and-forth over trial rules.

The body also underwent the largest renewal of counselors since the 2015-2016 reformulation, after Operation Zealots, which investigated the sale of sentences on the council — with the expiration of the mandate of many who joined at that time.

Carf is the body of the Ministry of Finance responsible for judging appeals on Federal Revenue assessments in tax and customs matters. It has 15 trial chambers and around 150 advisors, divided equally between representatives of taxpayers and the Tax Authorities.

Although it does not have a collection function, the government expects that changes in its operation will generate extra revenue of R$55 billion in 2024.

A victory for Finance in the council does not necessarily mean cash in hand for the government. Taxpayers, whether companies or individuals, can also appeal to the Judiciary, which generally occurs in large-value tax discussions.

The government’s bet is that the new Carf law, sanctioned at the end of 2023, will help change this scenario.

The law’s starting point was the provisional measure presented in January to end the pro-taxpayer tie-breaking vote that had been in force since 2020.

Since that year, the government had been holding back the judgment of high-value cases to avoid defeats in major tax discussions. As a result, the number of cases in Carf’s stock fell by 35%, but the value of those that remained trapped almost doubled.

Congress’s resistance to approving the government’s proposal generated uncertainty about the application of the new rule, which provided for a tie-breaking vote by tax representatives. Even so, the Treasury achieved relevant victories until September.

With the sanction of the new Carf law, that month, more high-value cases were discussed — the judgment is equal, but the government controls the agenda.

In October alone, the Treasury achieved a series of victories, with at least R$12 billion in tax assessments confirmed. More than half of the value involving Petrobras.

Even so, many large cases were removed from the trial agenda and were left to be analyzed again from this year onwards.

“With that instability regarding the quality vote [jargão para voto de desempate], it was not known what the tiebreaker rule was, the parties asked to remove the process from the agenda. We had a large batch of cases that will now be redistributed”, says Livia Germano, specialist in the tax area at Barros Pimentel Advogados.

Germano is one of the taxpayer representatives who had been at Carf since the 2015 reformulation, but left in mid-2023, after reaching the eight-year term limit.

At the end of the year, the government faced as a new obstacle the strike of Revenue auditors, including those who act as representatives of the Treasury on the council, and the trials were only resumed after a decision by the STJ (Superior Court of Justice).

According to Carf’s balance, there was a tie in around 3% of the number of cases judged last year until October. Generally, this occurs in major tax theses that remain unresolved in the Judiciary to this day, such as cases of taxation of profits abroad and premiums in mergers and acquisitions.

Gisele Bossa, partner in the tax area at Demarest and former advisor at Carf, states that the January trial agenda foresees the discussion of these topics again, including assessments worth more than R$1 billion.

According to her, high-value cases have been prioritized by the Treasury, regardless of how old the discussion is or not.

To make it easier for these amounts to be transformed into revenue, the new Carf law provides for payment under advantageous conditions for the taxpayer who loses the action with the deciding vote.

The tax expert states that the advantages of reducing interest and fines do not guarantee that taxpayers will give up questioning Carf’s decisions in the Judiciary.

She also mentions that the law validated the retroactive application of the tiebreaker by the Tax Authorities throughout 2023, but it is possible that some taxpayers who lost the discussion, based on a provisional measure that expired, will contest these results.

“The speech that Carf will simply generate revenue is very incongruous. It won’t. You have a lot of fights,” says the former counselor who worked at the organization from 2018 to 2022.

Another issue for 2024 is the renewal of the board of directors. Livia Germano, from Barros Pimentel, who left the board in July last year, says it was an atypical year for Carf, but says she hopes for a resumption of trials and some stability from now on.

“The classes are completely reformulated on the taxpayers’ side. A lot of people also left on the tax authorities’ side. But we hope that Carf will get going again and return to judging.”

At the end of last year, the council published a new regulation, with measures such as the creation of a virtual plenary session and the reformulation of the judging groups. There was a reduction in the number of counselors per class from eight to six and an increase in the total term of office to up to 12 years.