Government seals agreement to maintain charges in the event of a draw at Carf, but free of fines and interest – 02/14/2023 – Market

The government of Luiz Inácio Lula da Silva (PT) sealed an agreement to free taxpayers from paying interest and fines in the event of a tie in administrative judgments involving tax debts.

The expectation of the Minister of Finance, Fernando Haddad (PT), is to manage, with this, to preserve the so-called casting vote of CARF (Administrative Council of Tax Appeals), which guarantees the Treasury the maintenance of charges when there is a tie —even if the settlement means granting discounts on the payment of debts.

The negotiation, proposed by businessmen and endorsed by Haddad, seeks to avoid a government setback in the discussion of the economic package with the National Congress.

The parliamentarians overthrew the casting vote in 2020, during the management of Jair Bolsonaro (PL), and had been resisting the Lula government’s attempt to resume the instrument. In January, the president edited an MP (provisional measure) to reinstate the casting vote, effective immediately.

“It was a very big controversy, we all learned from the situation and forwarded, then, to the Federal Supreme Court, an understanding that is in force while the provisional measure lasts in the National Congress”, said Haddad to journalists, after a meeting at the STF to close the deal.

According to him, the agreement will now have a temporary effect – the MP is valid for up to 120 days, a period in which it needs to be validated by the Legislature –, but the expectation is that parliamentarians will incorporate the terms in the vote.

“I hope that the parameters established in the agreement will serve as a guide for the judgment of the National Congress and eventual sanction by the President of the Republic”, said the minister.

The agreement provides for a kind of “regulation” of the casting vote: in the event of a tie, the principal amount of the debt remains charged, but fines and interest are reduced, provided that the debt is still paid at the administrative level.

Contemplated taxpayers will have a period of 90 days to signal their interest in closing the dispute and, in this case, they will be able to make the payment in up to 12 monthly installments. In the event of non-payment in accordance with the established terms or default of any of the installments, the collection of interest will resume.

In addition, if companies decide to maintain the questioning through appeals to Justice, the interest will also be reincorporated into the debt, but the fines will remain extinct.

“We started to recognize the tie as something that puts the taxpayer in a situation that excludes punishment. If there was a tie, we have to take into account the fact that there was an important doubt about that tax. So, the fine falls regardless whether he pays in the administrative sphere or not”, explained Haddad.

According to him, based on the doubt generated in the judgment, it would no longer be possible to attribute a fine to the debtor for “bad faith” by not collecting the tax due.

The agreement was formalized in a petition from the Federal Council of the OAB (Order of Lawyers of Brazil), which had questioned the government’s MP in the STF. The expectation is that a precautionary measure will be granted by the Court allowing the application of the agreed terms.

As shown to Sheet, the agreement is the target of criticism from technicians from the Federal Revenue Service and the union for the category, who see an incentive for litigation as more companies would resort to Carf in an attempt to get rid of the charges. In addition, without correction by interest on the amount charged, inflation will erode the real value of the debt, increasing the Union’s losses and indirectly penalizing those who paid the tax on time.

Haddad said that the criticisms are “valid”, but the government’s option was to negotiate the reversal of a situation that was imposing losses on the federal government. Without the casting vote, the tie was freeing companies from paying any amount to the Treasury.

“In my opinion, the previous government made a mistake. We have to correct the mistakes made by the previous administration, it is not easy to undo this type of mistake”, stated the minister. “The price of the error is this. We momentarily have to give up on it to revert [a derrubada do] casting vote.”

Haddad pointed out that most of Carf’s debt stock is concentrated in the hands of a few taxpayers. “We’re talking about 120, 130 companies that accounted for R$600 billion, half of Carf’s stock in value,” he said.

“One [única] company owes R$ 100 billion to the Federal Revenue Service. It is a state. That way you can see the set of wrong things that were being done against the Brazilian State, against the Brazilian Constitution”, added the minister, without naming the company.

With the negotiation, he expects to maintain the volume of revenue projected by the government in the announcement of the package of economic measures. The “extraordinary incentives” linked to Carf and spontaneous reporting would result in R$50 billion in revenue this year, according to the Treasury.