What is CARF’s casting vote and why does Lula’s government support it?

A provisional measure (MP) issued in January by President Luiz Inácio Lula da Silva (PT) reestablished the so-called casting vote within the scope of the Administrative Council for Tax Appeals (Carf). The body is a collegiate formed by representatives of the State and society linked to the Ministry of Finance, with the attribution of judging, in the second administrative instance, disputes in tax and customs matters.

According to the MP, the advisors representing the National Treasury, who are the presidents of groups and chambers in Carf, will be able to tie the votes in favor of the Union. The measure had been extinguished during the government of Jair Bolsonaro (PL), through a device included by the National Congress in the processing of the so-called MP of the Taxpayer. From then on, it was established that ties would be decided in favor of the taxpayer.

The issue was taken to the Federal Supreme Court (STF) and there is already a majority formed against the casting vote, but the case is suspended at the request of Minister Nunes Marques. Despite this, the Minister of Finance, Fernando Haddad, classified what was happening at CARF as a “shame”.

“There is no way to justify such a thing. There are no OECD countries [Organização para a Cooperação e Desenvolvimento Econômico] or the G20 with that system. It is impossible for the taxpayer himself to judge an act of infraction, as is happening”, continued Haddad.

In the minister’s assessment, since the casting vote was overthrown, companies began to benefit from the pro-taxpayer tie. “We are not talking about thousands of companies, but about 20 or 30 companies that are benefiting from the pro-taxpayer tie with the most absurd theses, to the point of challenging the established jurisprudence of the Superior Court of Justice and the Federal Supreme Court”, he added. .

In the calculations of the Ministry of Finance, the return of the casting vote and other measures for Carf will cause an injection, this year, of R$ 50 billion in public coffers. In addition, they would also guarantee a permanent annual inflow of R$ 15 billion, estimates the folder. The measure was included in the package launched by the government to reduce the gap in public accounts.

Also according to Haddad, the change in legislation that occurred in 2020 caused a surge in the stock of cases accumulated at Carf, from BRL 600 billion, between December 2015 and December 2019, to more than BRL 1 trillion in October 2022 .

Last week, already in the first session of the Superior Chamber of Carf this year, the Farm won two victories thanks to the casting vote. In one of them, on taxation of profits abroad, the loser was Petrobras, in a case of R$ 5.7 billion. The other cause concerned the “30% lock”, a loss limit that can be deducted from the calculation of federal taxes levied on profit.

If the judgments had been carried out before Lula issued the MP, the Treasury would have lost the dispute, as the tied scores would have resulted in victory for the taxpayers.

Businessmen and tax experts criticize the provisional measure. For Danielle Dalledone, tax lawyer at Araúz Advogados, the initiative goes against the tax code – which determines a favorable interpretation for the accused in case of doubt – and tends to “asphyxiate” the taxpayer with more taxes.

“The return of the quality vote resumes the structure of a ‘super judge’, granting the Tax Authorities the right to two votes: one ordinary, being on the same level as the other judges, and another extraordinary, repeating its vote in situations that lead to a tiebreaker”, says the lawyer. “In practice, therefore, it means the resumption of a system partial to the collection interests of the Union and contradictory to the provisions of article 112, of the National Tax Code, which guarantees a favorable interpretation to the taxpayer in situations of reasonable doubt”, he completes.

Resumption of CARF casting vote faces resistance in Congress

Because it was made through a provisional measure, the return of the casting vote in CARF has been in effect since its publication. However, to become law, the text needs to be approved by the National Congress within 120 days. So far, parliamentarians indicate that they can overthrow the MP edited by Lula.

To try to avoid the setback, members of the governing base are already moving in the search for the maintenance of the casting vote of Carf. The expectation is that the text will be analyzed by the Chamber and the Senate until the beginning of March.

“We are facing a government that is willing to dialogue and talk with everyone. It is a necessity for the inclusion of Brazil within the list of democratic countries of the OECD. Brazil is the only nation that exists the model without the casting vote, for This is why we defend the approval of this provisional measure”, defended the leader of the government in Congress, Senator Randolfe Rodrigues (Rede-AP).

The deadline for submitting amendments to the text of the MP, which are proposals to change the original text made by parliamentarians, ended last Friday (3). From there, Minister Fernando Haddad intends to seek Congress leaders to negotiate the maintenance of the device defended by the government. “We are going to dialogue and talk to see the best fit and the best final text”, explained Randolf.

In addition to the government, the maintenance of the casting vote is defended by the National Sindifisco, the union representative of the Federal Revenue Tax Auditors. “The return of the casting vote puts an end to a distortion that reinforced the regressiveness of our tax system. Since 2020 we have had a very large loss for public coffers. It is well known that the greater the amount involved, the greater the chances of a tie and, therefore, the non-payment of taxes”, says the president of the National Union, Isac Falcão.

Despite this, the parliamentary front of entrepreneurship, which brings together just over 200 deputies and senators, is mobilizing against the MP of the Lula government. An amendment presented by the group provides that nominations for the CARF must be approved by the National Congress.

According to the amendment, these appointments would no longer be the prerogative of the Ministry of Finance and would be submitted to the Finance and Taxation Commission (CFT), in the Chamber, and to the Economic Affairs Commission (CAE), in the Senate, based on the referral of triple lists. Under the proposal, it would be up to the president of the CFT to choose one of the names to be questioned and approved by the two Houses of Congress.

“The appointment, in its current form, does not serve the sovereign interest of Brazilian society, as it concentrates too much power in the choices of these councilors in the hands of the Federal Revenue Service and the Executive Branch”, says the justification for the amendment.

OAB questioned Lula’s MP at the Supreme Court

In addition to the obstacles in the National Congress, the text of the provisional measure was questioned in a lawsuit filed by the Brazilian Bar Association (OAB) with the Supreme Court last week.

In the action, the OAB requests that, from the precautionary measure, the rule in force until the publication of the MP be adopted, or that the proclamation of the trial results of cases in which there is a tie in the vote be suspended, until the trial is concluded. of the STF on the matter, or that the National Congress converts the provisional measure enacted by the government into law.

“Appeasing the casting vote rule in CARF had the objective of equating a situation of inequality in the federal tax administrative process, preventing that, in the event of a tie between the CARF judges, the solution was always in favor of the Public Treasury”, defended the president of the National OAB, Beto Simonetti.

In March of last year, the STF judgment on the casting vote for Carf was suspended due to a request for views from Minister Nunes Marques and continues with no forecast of being resumed. Despite not being completed, there is already a majority for rejecting the device.

During the trial, Minister Alexandre de Moraes stated that defining the form of tiebreakers in the administrative court is a legitimate option. However, he recalled that the Constitution provides for a system of protection for taxpayers in relation to possible abuses and distortions by the State, which makes it more reasonable for the tie to be in favor of the taxpayer, and not the Tax Authorities.

The magistrate also pointed out that it is a mistake to state that the change would harm the Public Treasury, as most judgments in recent years have been unanimous, which shows that the casting vote is the exception. Carf’s own survey covering data between 2017 and 2019 showed that 93% of decisions on the board were taken unanimously or by majority vote.

According to this survey, 45,479 decisions (93%) in the period were unanimous or by majority vote, 2,269 (5%) were by casting vote in favor of the Treasury, and 700 (2%) were favorable to the taxpayer.