STF breaks final pro-taxpayer decision and releases retroactive collection

A decision taken by the Federal Supreme Court (STF) this week should cause billionaire losses to companies and increase legal uncertainty in the country’s business environment, evaluate tax lawyers. On Wednesday (8), ministers established the thesis that definitive decisions regarding tax collection can be “broken”, immediately, at the moment when the Court pronounces in the opposite direction.

Until now, the Federal Revenue Service could request the reversal of final and unappealable decisions, but through a specific instrument, the rescission action, which has a term of up to two years and which may or may not be accepted by the Justice.

The trial ended this week analyzed two extraordinary appeals (RE 949297 and RE 955227) concerning the Social Contribution on Net Income (CSLL), instituted in 1988. At the time, several companies appealed to the courts and obtained decisions that considered the Law unconstitutional 7690/1988, which created the tribute, and won the right – definitively – not to collect it.

In 2007, however, the STF declared the contribution constitutional, authorizing its collection by the Federal Revenue Service. In the appeals analyzed, the Union claimed the relativization of the effects of the decisions that freed Braskem and TBM Têxtil Bezerra de Menezes from the CSLL, both already final and unappealable, therefore without the possibility of new appeals. That is, the thesis now established by the Supreme Court justices, of general repercussion, can open a loophole for the alteration of the effects of sentences once considered definitive.

“[A decisão] creates an environment of great legal uncertainty, not only from the tax point of view, but from the legal point of view as a whole”, says Gabriel Placha, coordinating partner of Araúz Advogados and professor of Tax Law. “Allowing review of situations that were already consolidated in past sets a dangerous precedent so that everything can be re-discussed”, he opines.

For him, the decision increases the hostile climate in the Brazilian business environment, making it even less attractive for investors to undertake in the country. “The investor who wants to open a business and knows a little about our reality is already afraid because of everything he is subject to, not only from the tax point of view, but in relation to bureaucracy in general”, he says.

“Foreign investors don’t even talk about it, because it’s already difficult for them to understand our tax system. Now having the possibility that 15 or 20 years later his business will be subject to paying a tax that in the past was understood, in a definitive way, that it wasn’t due, it’s quite complicated.”

The ministers’ votes were based on the argument that the exemption given to some companies caused a competitive imbalance, since companies competing with each other ended up having different treatment in relation to the collection of the tax.

“If there was this imbalance, the harmed company could seek to correct it in court. What cannot be penalized is those who had a decision in their favor from the moment the Supreme Court’s understanding changes, causing it to collect retroactively” , assesses Placha.

In government, the decision was well received. To the newspaper “O Estado de S.Paulo”, the secretary of the National Treasury, Rogério Ceron, said that the increase in revenue already foreseen with the fiscal adjustment package announced in January should be reinforced.

Billing can be done retroactively

The plenary of the STF was unanimous in relation to the loss of effects of final decisions on tax matters in the event of a subsequent understanding to the contrary. In addition, by majority, the collegiate considered that, similarly to the creation of a new tax, the Court’s change of understanding on the collection of a tax must comply with the annual precedence or, in the case of social security contributions, the precedence of 90 days.

However, the ministers decided not to apply the so-called effects modulation, which would only allow charging from now on. As a result, the Revenue will be able to charge retroactively, with a fine and correction, taxes that – based on final court rulings – were not collected in the past.

Lawyers in the area say it is not possible to calculate the size of the damage that companies impacted by the decision may have. This is because, with final decisions in their favor, companies do not include amounts referring to these taxes in their balance sheets.

CSLL is calculated on profit and has a rate of 9% for legal entities in general, and may reach, today, 21% in the case of financial institutions – in the period in question, the ceiling was 15%.

To the newspaper “O Estado de S.Paulo”, specialists in the sector stated that the change will have a direct impact on at least 30 large groups, including Embraer, Pão de Açúcar (GPA), BMG, Zurich Seguros, Banco de Brasília (BRB ), Holding Alfa, Samarco, Magnesita, Grupo Ale Combustíveis and Kaiser.

Based on Embraer’s last quarterly balance sheet, the estimated impact on the aircraft manufacturer is at least BRL 1.16 billion per year. According to the newspaper “Valor Econômico”, the mining company Samarco may have to pay a bill of R$ 6 billion, while Vale would have around R$ 1 billion under discussion.

“The application of its effects without proper modulation is regrettable, as it clearly violates the principle of non-surprise”, says tax lawyer Fernando Lima, partner at Lavocat Advogados.

“It is claimed that taxpayers would already be aware of the position of the STF in relation to the constitutionality of the collection of the tax, but the nature of the ‘average man’ of the taxpayer is ignored, as well as that the position on the rupture of the effects of res judicata only became known in this week’s judgment”, he considers.