Government proposes that Revenue should stop punishing taxpayers with a good payer stamp – 05/05/2023 – Market

The government of Luiz Inácio Lula da Silva (PT) sent a bill to the National Congress that authorizes the Federal Revenue Service to stop punishing taxpayers who have a kind of seal of good tax payer, if they temporarily fail to fulfill any obligation with to the tax authorities.

The initiative creates the so-called “compliance classification”, based on criteria such as the regularity of registration and collection of taxes, accuracy of the information provided, among other items defined by the Federal Revenue Service.

The classification will be adopted within the scope of the Confia Program, which is in the implementation phase and should start operating in the second half of this year. The better the rating and reputation of the companies, the more benefits they will have. One of the incentives is the possibility of self-regulation, that is, the taxpayer recognizes that he has not paid any due tax and collects it without being punished.

The project says that the Revenue may “fail to apply any administrative penalty” in these cases. Today, the ex-officio fine applied by the agency in case of non-payment of any tax is 75% of the credit amount. The percentage is doubled in case of fraud.

The text brings the working principles of the classification of taxpayers, which can be applied to various compliance programs —including one eventually aimed at Chinese retailers such as Shein, which were at the center of the recent controversy surrounding the taxation of remittances to Brazil. Finance Minister Fernando Haddad said in April that these companies must adhere to a “code of compliance” from the Federal Revenue Service.

The proposal was included in the text that seeks to replace the MP (provisional measure) that resumes the tie-breaking vote in the Carf (Administrative Council of Tax Appeals). The court judges billionaire disputes between companies and the Union regarding the payment of taxes. The presidential message that records the sending of the bill was published this Friday (5) in the Official Gazette.

The MP was one of the main items in the fiscal adjustment package presented by Haddad in January. However, the text began to face resistance from large companies and the National Congress. Its processing also ended up being affected by the arm wrestling around the rite of processing the provisional measures.

Therefore, the government replaced the CARF MP (which was effective immediately, but needed to be validated by June 1) with a bill, which requires less urgency for discussion and only becomes effective after voting in Congress. The exchange took place at the request of the President of the Chamber of Deputies, Arthur Lira (PP-AL), who, in turn, committed to voting on the proposal within a period of two weeks.

When sending the bill, the government took the opportunity to include the section that details the classification of conformity and the possibility of creating specific programs, focused on encouraging companies or sectors to maintain a less litigious relationship with the Revenue.

The federal program is inspired by “Nos Segundos”, created by the state of São Paulo in 2018, still under the management of Geraldo Alckmin — today vice president and minister of Development, Industry, Commerce and Services.

Cooperative compliance between companies and tax authorities exists in developed countries such as the United States, France and Portugal, and its adoption has been recommended by the OECD (Organization for Economic Cooperation and Development) since 2013.

In addition to the non-application of punishments, the project provides that compliance programs will be able to offer taxpayers guidance on the collection of taxes and customs procedures, priority in the analysis of administrative processes (including when there is a request for refund or reimbursement of amounts) and preferential service in providing services.

To avoid the application of penalties, the proposal requires the taxpayer to voluntarily present “relevant legal acts or business for tax purposes” before the beginning of the tax procedure. Another requirement is the timely response to requests for information made by the Revenue Service.

Restoration of the casting vote

In addition to the conformity classification, the bill takes up the government’s proposal to reinstate the so-called casting vote in CARF, which gives the president of the court (appointed by the Treasury) the power to decide in case of a tie.

The casting vote was overturned in 2020 by Congress, increasing the Union’s losses in a court that already served as a maneuvering instrument for large companies to postpone the collection of taxes due to the Federal Revenue for years.

In one of his first measures in office, Haddad announced an MP to restore, immediately, the application of the casting vote in CARF’s decisions. The measure, however, began to face resistance from large companies and parliamentarians. The procedure was also hampered by the imbroglio involving the rite of MPs.

The president of the National Congress, senator Rodrigo Pacheco (PSD-MG), determined the return of the constitutional model, in which the provisional measures are evaluated initially by specific joint commissions to deal with the subject, with equal composition between deputies and senators.

The rite was no longer adopted during the Covid-19 pandemic, when the two Houses adopted remote work and alternative formats for joint votes by the National Congress and for the appreciation of MPs.

Lira, however, opposed the resumption of the constitutional rite, requesting a greater proportion of deputies.

The government even announced an agreement with Congress for the immediate installation of four mixed commissions to consider provisional measures of greater importance to the Executive, including the CARF. In the first half of April, however, the government ended up backing off and decided to forward the proposal in the form of a bill.

“Carf’s MP will be an urgent bill [constitucional] presented by the government. There was a demonstration on the part of the Ministry of Finance, understanding with the president of the Chamber, with the political coordination of the government, Minister Alexandre Padilha [Relações Institucionais]that this was the best course of action”, said the leader of the government in Congress, Randolfe Rodrigues (Rede-AP).

Despite internal resistance from businessmen and some sectors of Congress, the proposal to change the Carf rules has been receiving support in international economic forums.

The OECD sent a letter to the Brazilian government contesting the Carf operating rules, which provide for equal representation of the Treasury and private taxpayers, but stated that recreating the casting vote would be a way to mitigate problems —such as the potential conflict of interests in judgments.