OECD’s criticism of CARF disregards the country’s context – 04/28/2023 – Market

This week, it was broadcast on Folha de S.Paulo part of the content of the letter that the Minister of Finance received from the Organization for Economic Cooperation and Development (OECD) on the form of judgment in the Administrative Council of Tax Appeals (CARF).

The letter states that the CARF trial system, in which people from the private sector participate in the second instance, is atypical or rare. In addition, it points out that it is inappropriate that, in the event of a tie in the decision, the casting vote should be attributed to the representative of the taxpayers and, finally, it demonstrates strangeness in the fact that the Tax Authorities cannot discuss it in the Judiciary, in case it loses.

The letter states that this system practically only exists in Brazil. Simply put, he says that the way Carf cases are judged is more like a Brazilian “jabuticaba” and advises modifying the model.

It should be noted that not all “jabuticaba” is of poor quality or undesirable for the country. Take the example of electronic voting machines. They don’t exist in the world, only here. The Unified Health System (SUS) also does not exist in most countries.

There is no way to compare OECD countries with Brazil. Those are rich countries, this is a poor country. Ask the signatory of the letter if they have the Federal Revenue that we have here (another “jabuticaba”). Ask the signatory of the letter if the inspector can act there as he sees fit without going through supervision in this regard.

In Brazil, the inspector has functional autonomy. He acts according to his worldview and values, which may be totally different from the correct interpretation of the law.

Ask if the inspector there can earn a salary according to the volume of infraction notices he makes (this is the pretension of the category in Brazil with the creation of the efficiency bonus). Ask if they apply the highest penalties (75%, 150%, 220%) and interest (14% per annum) in the world.

It is criticized that, in Brazil, the time to judge a case at CARF is seven years, while in OECD countries it is 3 months. It is necessary to question how many infraction notices are carried out in Brazil and how many are carried out in these countries. Could it be that, in these countries, they have 10,000 processes? Or 100? Would they be able to judge the cases in three months if the number was the same as in Brazil?

It is a mistake to compare different scenarios, laws and different cultures as if they were the same. These countries do not have the tax litigation that we have: between 60% and 70% of GDP. We cannot attribute the blame for this dispute to the entrepreneur alone. The government, and especially the Federal Revenue, is also responsible, since there are many “jabuticabas” in the tax machine.

A national tax pact is necessary, through which government and taxpayer sit at the table to discuss the Brazilian tax system.

See the good example of the agreement reached between the government, OAB and some business entities regarding the regulation of the casting vote. There was sensitivity on the part of the government and taxpayers and a reasonable middle ground was reached: in the event of a tie, fines and interest are reduced and the main tax amount remains. It is not the best alternative for the taxpayer and the government, but it is not the worst either. Negotiating, you arrive at a common place.