What is Carf and how does it work – 01/05/2024 – Market

Carf (Administrative Council for Financial Resources) is the body of the Ministry of Finance responsible for judging appeals on Federal Revenue assessments in tax and customs matters.

The council has 15 trial chambers and around 150 advisors, divided equally between representatives of taxpayers and the Treasury.

A first version of Carf is the Income Tax Contributors Council, created in 1924 with representatives from the private sector and public employees, linked to the Ministry of Finance.

In 2008, Carf was created, which unified the administrative structures of the three then existing Taxpayer Councils, with the purpose of judging appeals on Federal Revenue assessments.

In 2015, the agency’s activities were suspended due to the launch of Operation Zelotes, in which the Federal Police investigated a sentence sale scheme.

After the operation, the Carf underwent a redesign. Taxpayer representatives were prohibited from practicing law, began to be remunerated for their role and had mandates of a maximum of eight years, among other restrictions. As a result, 75% of these advisors resigned.

In 2020, a last-minute change made by the National Congress in the Legal Taxpayer provisional measure ended the so-called “qualifying vote”, the tie-breaking vote given by a representative of the Treasury.

The justification for this “double vote” is that the taxpayer, when he loses, can re-discuss the issue in the Judiciary. When the tax authorities fail, the government cannot go to court.

At the beginning of this year, the Ministry of Finance proposed the return of the quality vote, which was approved by Congress, but with changes in relation to the government’s proposal, after agreement with representatives of the private sector.

Taxpayer representatives are nominated by the employer confederations of large economic sectors, through a triple list, with training, knowledge and experience in federal and customs taxes required. The choice is made by a selection committee and must be endorsed by the Minister of Finance.

Law changed operation in 2023

In July last year, a law was enacted that changes Carf’s operating rules. Sanctioned by vice-president Geraldo Alckmin, law 14,689 brought back the tie-breaking vote by a representative of the Union.

The vetoes on other points of the project were criticized by tax experts. See the report with these analyzes here.

The government counts on R$54.7 billion from Carf to eliminate the deficit in the 2024 Budget.

Carf’s stock grew rapidly after the end of the quality vote in 2020. Currently, 161 “billion-dollar” processes account for around 40% of these values. Of the processes analyzed this year until June, 3.2% were resolved with a quality vote and 0.4% with the pro-taxpayer tie in force since 2020.

The expectation, with the change in law, was that processes totaling R$1.1 trillion would be unlocked in July 2023. The amount is almost double that seen in 2015, when the council underwent a major overhaul after the Operation Zealots.