Tax negotiations law three years ago, reaches BRL 400 billion and leaves Refis behind – 04/15/2023 – Market

The law that regulates the new forms of negotiating the Union’s active debt with taxpayers (13,988/2020) completed three years this Friday (14), with a balance of R$ 404 billion in negotiated tax debts, R$ 22 billion collected and forecast revenues of R$ 250 billion in the coming years.

Football teams such as Vasco, Cruzeiro and Chapecoense, public entities and companies undergoing judicial recovery are among the debtors who settled accounts with the PGFN (Attorney General of the National Treasury) in the so-called individual transactions, those involving amounts above R$ 10 million since 2020.

Aircraft, real estate, precatories, trademark rights and the sale of athletes are among the assets handed over to the Union to guarantee the payment of these amounts.

According to the PGFN, one third of the BRL 2.7 trillion of the Union’s outstanding debt is currently classified as guaranteed, negotiated or in the process of discharge, also considering other collection processes. Three years ago, there were 14% in this situation.

The consolidation of the tax transaction is one of the factors that has contributed to the Union and taxpayers being able to leave behind the installment programs in the Refis format, which proved to be inefficient in separating the persistent debtor from those who face financial problems, according to the attorney general’s office.

“Refis is not an adequate public policy to save taxpayers in economic difficulty. That was never the intention. The program is not made for those who are broke. Large economically healthy companies took advantage”, says João Henrique Chauffaille Grognet, attorney- Deputy General Manager of the Active Debt of the Union and the FGTS.

While Refis was a discounted installment plan that disregards the taxpayer’s ability to pay, and also the chances of debt recovery, the transaction defines these points as fundamental to calculate discounts, down payment, term and payment guarantees.

“It is a remedy designed for the taxpayer. There is one that will have a 0.1% discount and another that will have a 70% discount, which is the limit of the law. Public policy has become more accurate, because you give the discount according to the need”, says Grognet.

He highlights that the exceptional transaction of Covid-19, a modality that was open from 2020 to 2022, the first in which the attorney general made a broad program in which the payment capacity of companies and individuals was considered.

Theo Lucas Borges de Lima Dias, general coordinator of Dívida Ativa, says that around 25% of the agreements signed so far refer to micro and small companies, also considering simplified negotiations (from R$ 1 million to R$ 10 million) and adhesion by public notice for cases below this amount.

Debts with Social Security and the FGTS have also been the subject of negotiations. In the latter case, the discount is applied only to the interest directed to the Fund, and the payment of 100% of the amount due to the worker with interest is guaranteed.

In the first three months of 2023, the Attorney General’s Office has already raised more than BRL 6 billion, with transactions and other collection strategies, an amount that exceeds that of the same period of 2022.

A survey by lawyers Flávia Bortoluzzo and Filipe Luis de Paula e Souza, from the LBZ Advocacia office, shows an average discount of 57% on fines, interest and general charges in about 200 individual transactions and an average installment period of 90 months, but with a wide variation according to the taxpayer.

“In the refinancing programs, general conditions were established, with a standard concession for all taxpayers, and this generated many distortions. Now we have a solution assembled according to the taxpayer’s needs, and with the Attorney’s Office in charge of this solution, the constructions are much more technical”, says Flávia Bortoluzzo, partner at LBZ Advocacia.

“The office defends this a lot: explaining to the client that this negotiation is viable, opening financial information that the Attorney’s Office already has access to, but that we will take with our clarifications of why I need more financial breath, why I accumulated that liability.”

The transaction is an instrument used in other countries, such as the USA, Australia and the United Kingdom, according to a study by Insper’s Taxation Research Center, coordinated by lawyers Daniel Zugman and Frederico Bastos, from the BVZ Advogados law firm.

Zugman says that some Brazilian states and municipalities have laws regulating the subject, but have not put the modality to work in practice. Others just revamped the state Refis. Only the state of São Paulo has a more robust performance, according to an analysis of local programs that should be published soon by Insper.

“Some took a ride on this transaction terminology, but in practice they continue to implement installments in the old way, without measuring the taxpayer’s ability to pay. Many states and capitals published regulating laws, but it never happened”, he says.

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Active debt recovery grows 23.4% in 2022

• BRL 39.1 billion (Total recovery)
• BRL 14.1 billion (Tax transaction)
• BRL 583.9 million (FGTS)
• BRL 404.3 billion (Settled with transaction until 2022)
• BRL 2.7 trillion (active debt stock)
• BRL 1 trillion (credit with greater potential for recovery)

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Frederico Bastos says that the Brazilian model is succeeding in reducing litigation and increasing the efficiency of tax credit execution, in a country with trillionaire tax litigation and a high degree of litigation between taxpayers and public authorities.

“It may be that at a future time, when we have a reduction in litigation, and the relationship between tax authorities and taxpayers is less litigious, that we review some criteria, but today, it is in line with the scenario and that the tax authorities and the taxpayers need to sit down and talk.”

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How does the tax transaction work?

The transaction is a negotiation of tax debts, with the possibility of discounts and installments in accordance with the taxpayer’s ability to pay and the guarantees involved.

There are different modalities:

• By individual proposal, submitted by the debtor
• By joining proposals with specific conditions launched by bodies such as PGFN or Revenue
• By accession, in the case of a small tax dispute

Who can submit a negotiation proposal?

Debts in administrative litigation or within the period of administrative claim, appeals and other petitions (Federal Revenue) or registered in overdue debt (PGFN)

What are the conditions?

• Discount of up to 65% on the total amount, up to the limit of the original debt amount, depending on payment capacity. In practice, some taxpayers may end up being completely exempt from interest and fines. Maximum percentage rises to 70% in the case of MEI (individual micro-entrepreneur) and micro and small companies
• Term of up to 120 months to settle the remaining balance, or 145 months in the case of MEI, micro and small companies
• Possibility of using tax loss credits and negative CSLL calculation base to settle up to 70% of the remaining balance, after discounts
• Possibility of using court orders or offering guarantees

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