OECD supports Fazenda and recommends return of the “quality vote” in Carf

The return of the so-called “quality vote” to the Tax Resources Administration Council (Carf), which is part of the fiscal adjustment package proposed by Minister Fernando Haddad, of Finance, at the beginning of the year to increase tax collection, received a position favorable opinion of the OECD, also known as the “club of the rich”.

In a letter to the ministry released this Wednesday (26), the Organization for Economic Cooperation and Development states that there is no parallel between the countries evaluated for adopting the same mechanism in force in Brazil since 2020, which suspended the rule that gave directors of the National Treasury the tie-breaking power of CARF’s decisions.

The statement was made after Haddad consulted the OECD and was answered by the organization’s director, Grace Perez-Navarro, on March 31. According to her, the return of the casting vote to CARF will not harm taxpayers, who were benefiting from a favorable decision without judicial questioning by the government.

“This will not have a negative impact on taxpayers’ rights because they will still retain their recourse to independent judicial review, where they will be able to challenge, on a legal basis, the tax assessment as well as the taxes claimed and penalties applied,” he said.

According to her, the suspension established in 2020 – and which is the subject of a provisional measure pending in the Chamber of Deputies – made Carf’s decisions favorable to taxpayers by annulling taxes and penalties when the votes of judges representing the private and public sector result in a draw.

However, says Grace in the letter based on information provided by the ministry, when the decision is taken against the tax administration, the decision cannot be appealed and becomes final, despite the result having been reached due to a tie in the votes.

“This seems inappropriate, as if the decision is the result of a tie, it indicates that there are some challenging legal issues that are likely to deserve clarification and resolution through an independent judicial process, rather than concluding that the case is reasonably resolved and should be considered definitive,” he added.

According to the ministry, the volume of tax liabilities in dispute at Carf is in the range of 12% of Brazil’s annual Gross Domestic Product (GDP), which represents approximately 25% of the federal public debt. The lawsuits take 7 to 11 years to decide, which prolongs the litigation until, in some cases, the statute of limitations, which “can motivate taxpayers to endless litigation”.

Formation of the Carf collegiate

Grace Perez-Navarro also questioned the formation of CARF that benefited taxpayers, stating that there is a “conflict of interest” with judges representing the private sector, who would be lawyers who worked for companies before being appointed to the position.

“The short-term nature of these appointments, the comparatively low remuneration and the fact that, both before and after this appointment, these judges may work for the private sector and may derive direct or indirect benefits from the positions they assume in their role as judges. judge at CARF could, in some cases, also create a potential risk of conflict of interest, which can be very difficult to mitigate”, he says, classifying them as “lay judges”.

According to the director, reviews of decisions in most other countries are carried out by government officials from the tax administration or the Ministry of Finance. Only three jurisdictions have private sector involvement in decisions, but with the oversight of professional career judges who have the final say on cases.

The OECD letter strengthens Haddad’s position for the return of the mechanism, which needs to be voted by Congress by May to become law and not lose validity. In an interview with “Folha de S.Paulo”, the minister said that he will forward the text to parliamentarians.

In mid-February, the government closed an agreement with the Brazilian Bar Association (OAB) and companies so that the casting vote would have better conditions for taxpayers, including that the company or individual that has a losing cause has a fine and interest canceled if payment of the principal amount occurs within 90 days of the decision.