Revenue investigated an increase in tax compensation for large companies, says Haddad

The Minister of Finance, Fernando Haddad, stated this Wednesday (1st) that the Federal Revenue Service investigated the increase in tax compensations for the Social Integration Program (PIS) and the Contribution for Social Security Financing (Cofins) by large companies. According to the minister, the use of this mechanism has caused a drop in federal revenue in recent months, and the government wants to go over the operations with a fine-tooth comb.

“The GDP [Produto Interno Bruto] is growing 3%, revenue is not growing 3%, not even close to that. We had to carry out an investigation into the matter, because we discovered that companies are compensating in that 2017 PIS/Cofins decision, and that the subsidy is increasing compared to last year”, stated Haddad. The statement was made after the minister met with President Luiz Inácio Lula da Silva (PT) and the Minister of Planning and Budget, Simone Tebet, at Palácio do Planalto. According to the minister, this was the theme of the meeting.

Through tax compensation, the taxpayer obtains discounts on future taxes to offset taxes previously paid in excess. In relation to the increasing use of the mechanism this year, companies are using a 2021 Federal Supreme Court (STF) decision that defined that the removal of the Tax on the Circulation of Goods and Services (ICMS) from the PIS and Cofins are valid from 2017.

The minister avoided informing what strategy the government will take to curb the increase in the use of tax compensation, reported the Brazil Agency. “I cannot anticipate the strategy, it must first be brought to the president’s attention, because he needs to validate the decisions we are going to make. But he is worried, because he is seeing that something from 2017, both in Congress and in the STF, is having repercussions now,” he said.

Haddad also stated that the Federal Revenue Service spent two months, between August and September, “investigating company by company”, until reaching the diagnosis of the alleged misuse of PIS and Cofins compensation. “The Revenue has the right to know what is being collected and by whom. We even checked with the Judiciary to find out if that discount was based on an account audited by the Judiciary,” he highlighted.