Senate Bill provides for combating persistent debtor

At the moment when the implementation of a new Refis, for the renegotiation of companies' debts, is being evaluated, the discussion about the search for compensatory measures arises.

In this sense, there is an initiative ready to be voted on by the plenary of the Federal Senate that will allow the fight against the persistent debtor, who bleeds the federal coffers in the order of R$ 14 billion a year, only in the fuel market. It is PLS 284/17 that provides, among a series of measures, the objective distinction between debtors: the eventual debtor e the reiterated debtor (who will not be affected by said PLS) and the persistent debtor, this yes, must be fought, therefore, it is structured intentionally to not pay the taxes due.

To get an idea of ​​liabilities, also in the fuel sector, active debts reach R$ 70 billion. Which corresponds, for example, to 8% of the GDP of Minas Gerais last year.

PLS 284/17 was reported by Senator Fabiano Contarato (PT-ES) and was approved by several committees and now it only depends on the President of the Federal Senate, Rodrigo Pacheco (PSD-MG) to move forward and be guided. The delay in approving this project encourages the persistent debtor, harming the public coffers and society as a whole.

For the president of ETCO (Brazilian Institute of Competition Ethics), Edson Vismona, who follows the progress of the agenda in Congress, the great challenge of the Brazilian legal system is to differentiate the defaulter from the persistent debtor. “Contumaz is not a taxpayer, he is a criminal, as he practices fraud in the exercise of his activities. The defaulter, on the other hand, wants to be up to date, but due to different circumstances they are unable to pay their tax obligations, this one deserves attention from the government and stimulus for its regularization, whereas the persistent must be repelled ”, he says.

Transnational Crime

The performance of criminal organizations in our country is known throughout society and has been fought by the police and intelligence forces, the Public Ministry (federal and state), the Federal Revenue and the Judiciary. 

Since the beginning of this century, however, we have seen not only growth in terms of presence on our borders (articulating smuggling, especially cigarettes and drug and arms trafficking) and in cities, but also as an expression of financial, logistical and in the use of heavy weapons, facing the State. 

The criminal structure became sophisticated, with levels of governance, expanding its action in all regions of Brazil and advancing through South American countries, increasing its power and, according to the report of experts in the fight against organized crime, infiltrating the three powers of the Republic and influencing elections. 

The tentacles are felt in cities besieged by what is called the “new cangaço” that promote the theft of banks, transport companies and create market reserve in communities selling cigarettes, stolen cargo, cable TV, real estate, structuring the traffic of drugs and weapons, distribution of fuel, gas and electricity. They occupy the space that should belong to the State. 

We have already had unusual scenes of “salves” paralyzing the largest city in Brazil and articulating rebellions in prisons across all the states of the federation.  

This reality demonstrates that we must invest more and better in its fight in a coordinated way, using information and intelligence, especially to target financial transactions and money laundering operations. 

We advanced with the creation of GAECOS in the Public Ministry; Intelligence and Control Centers in the States; of the Secretariat for Integrated Operations and the Integrated Center for Border Operations in the Ministry of Justice and Security, Integrated Border Protection Program in the Institutional Security Office, but the strengthening of the COAF - Financial Activities Control Council was lacking. 

Understanding the dimension of the problem should help identify the means to combat it. The entire existing state structure must be increasingly integrated and coordinated, using technology, crossing information and mapping crime areas, collecting data and, fundamentally, sharing them between institutions. 

I had the opportunity to visit the National Center for the Coordination of Intellectual Property Rights in the United States (IPR Center) and witness a very interesting experience: a space that permanently brings together representatives from 25 US federal agencies and the Canadian and Mexican governments, assessing threats, defining actions and sharing information, this last point, in the view of the Americans and also because of what we have identified in Brazil, is the biggest challenge. Those who have the information resist sharing, creating serious obstacles to actions. In a speech, the US Secretary of Justice said that 11/XNUMX demonstrated how damaging the lack of inter-agency information exchange can be. 

In Brazil, the Federal Court of Auditors presented, in 2018, a report evaluating the application of resources in the control of our borders and made important recommendations for those responsible for security: Development of integrated and coordinated work between agencies; promotion of coalitions; face differences, identify conflicts, map processes. 

Internally, the promotion of these initiatives represents a great challenge, however, we must consider that we must face an even more complex challenge, to undertake this cooperative attitude between countries, which also suffer from the presence of criminal organizations operating in their territories, challenging the sovereignty and affronting public security. Argentina and Paraguay have already identified actions structured by branches of the most articulated Brazilian criminal faction. The Argentine authorities even point to links with Hezbollah, which has strengthened the logistics for international drug and arms trafficking. 

The actions of criminals are increasingly bold. A sad example occurred recently with the murder of the Paraguayan prosecutor, Marcelo Pecci, who was active in the fight against organized crime, and, let us not forget, the murder of the Brazilian judge Antonio Machado Dias, who performed the function of inspector of prisons in the interior of São Paulo in 2003. These crimes and the constant threats suffered by prosecutors, judges and police fighting criminal factions in Brazil and Latin American countries attest to the urgent need for a more intense connection of police and intelligence forces between countries.  

To combat transnational crime, it is imperative that there are permanent institutional actions that allow for interaction between governments, public ministries and the judiciary. Certainly, ideological disputes cannot prevent the strengthening of this Latin American public security defense strategy.

Article: Young people, ethics and the job market

In this century, we are experiencing profound changes in the job market, from the dominance of the use of digital tools to the growth, with the pandemic, of the so-called telework. The impact on everyone's lives was vast.

Adapting to changes has been more difficult for the so-called analogue generations, who have to deal with paradigms they did not have in their training, but the younger ones also face new challenges, especially related to entering the job market.

At the end of March, Instituto Coca-Cola, ETCO and Cufa – Central Única das Favelas held a Live on this topic: Ethics, Youth and the World of Work with the participation of young people who have been looking to get their first job. . It became clear that professional training, the incorporation of technology, the understanding of how the organizational structure of companies works, the sense of responsibility and innovation are important factors, but the behavior, the rules of coexistence start to be demanded in both directions: from market with young people and young people with companies. The questions show that attitudes, previously not so considered, have become decisive.

Young people want to know what possibilities they will have for their professional development; if the company encourages participation, giving freedom to express their opinion; if the schedule is flexible, finally, through a better balance between personal and professional life, aspects related to happiness are presented. It is interesting to note that in a survey carried out by Linkedin, the answers related to money (salary increase, earning more than your friends) were at a lower level.

This is the portrait of the positioning of young people, as by the companies, there is also a concern about the posture of young people in relation to values ​​and principles, practices related to professional practice can be taught, but understanding what is right, honesty, character , respect must be seen as an attitude that precedes work skills.

In fact, this understanding of ethical values ​​was demonstrated in the national survey carried out by ETCO/Datafolha on the perception of ethics by young people, where these questions were pointed out when they think about what it means to be ethical.

This view of ethics in the labor market was also attested in another survey carried out by the Eureca consultancy, indicating that young people consider that ESG metrics should be respected by companies, thus defending the environment, issues related to inclusion, diversity , governance, anti-corruption are charged.

In this aspect, there is a clear convergence, young people and companies are increasingly moving towards new postures and purposes, seeking a healthier, more ethical and welcoming work environment, strengthening their identity and the satisfaction of belonging to the organization.

The data presented in these researches are interesting indications of the moment we are living, of the need to face new postures, in a clear sense of the evolution of behaviors and requirements.

Constant adaptation is necessary, the dogmatic posture has become outdated, the exercise of values ​​has become the rule.

This reality, on the one hand, demonstrates a sense of progress in expectations, on the other, it arouses my concern, as we realize, not only in Brazil, but throughout the world, that leaderships, especially in the political sphere, do not show that they are aligned with this moment that presents itself as disruptive, the old is left behind, but the new has not yet been consolidated, the discourse needs to be put into practice.

It is not without reason that the young man has shown a distance from politics. He does not see in our institutions a commitment to the standards they defend, which do not share his worldview. This is nothing new, the youth always questioned the status quo, however, they identified in the exercise of politics an action that could make changes possible, hence the student movement. Today, however, I see a disillusionment, a dismay with the exercise of politics as an effective pact with the public interest.

Our obligation, as social and business organizations, is clear, we have to defend a clear attitude of defense and practice of values ​​that strengthen our purpose and involve the youngest. They point out what they want, we need to pave the way, to help reach the common destiny.

Brazil: Losses and gains

When identifying losses caused by an action, we seek to demonstrate the losses in values ​​to facilitate the understanding and extent of the damages.

Thus, when estimating the impact of the illegal market; the size of informality and tax litigation, we extract figures that reflect the losses and, consequently, the gains if this space were occupied by legality, formality and rationality in the application of our tax system.

We have institutions that develop metrics trying to gauge the dimension of these deviations.

ETCO developed with IBRE/FGV the underground economy index carried out since 2003 and which in 2021 reached the figure of R$ 1.3 trillion, which represents 16,8% of Brazilian GDP and with the consultancy EY sponsored an international study that found that the litigation tax, in the administrative and judicial instances, reaches the astounding amount of R$ 3.4 trillion.

Regarding informality in Brazilian retail, the IDV — Instituto para o Desenvolvimento do Varejo conducted a survey with the consultancy McKinsey & Company that indicates that tax evasion in physical retail is from 25% to 34% and in digital from 33% to 37% of sales (which has been experiencing a continuous growth in the supply of illegal products without invoices), with values ​​between R$ 95 and R$ 125 billion.

The National Forum Against Piracy and Illegality collects data from 15 productive sectors (clothing; fuel; personal hygiene, perfumery and cosmetics; alcoholic beverages; pesticides; pay TV; cigarettes; sporting goods; eyewear; PCs; software; cell phones; audiovisual; imported perfumes and toys) since 2014 and the survey for the year 2021 shows that these sectors had losses of BRL 205.8 billion, which added to BRL 94,7 billion (conservative estimate of an average of 46% of uncollected taxes) reaches the amount of R$ 300.5 billion. Compared to 2014, the illegal market (smuggling, piracy, counterfeiting and fraud) grew three times.

These figures of billions and trillions of reais related to the losses of industry, commerce and the formal economy make us wonder what would be the gain for the generation of jobs, revenue and impulse for our development and innovation. A simple example, adding the evasion of retail and industry indicated only in the IDV and FNCP surveys, it would be possible to finance 18 million family grants for more than 38 months with a monthly amount of R$ 300.

These projections are limited to numbers and what could be generated in gains for society as a whole, however these losses for society cannot be measured only in monetary values, as they have other consequences, whether for public safety, increased corruption and decreased productive investments.

Our police and IRS forces (federal, state and municipal) prove that criminal organizations are financed with these withheld resources, also encouraging drug and arms trafficking.

On the other hand, employment level is affected. Factories were closed and others are under threat, including the growth of persistent debtor companies that are structured to never pay taxes and, thus, erode competition. The fuel and tobacco sectors have suffered from this action, but the textile sector has also been shaken.

The various faces of illegality and the operations of persistent debtors form a criminal economic phenomenon, which has to be attacked by supply and demand. Offer, with repression, through integrated and coordinated actions of police forces and revenue.

The demand, on the other hand, is motivated by the price, which is lower in the illegal one thanks to evasion and must be faced with changes in the tax system. An example of what can be done is the recent simplification of the ICMS charge on fuels, defining the single-phase and single rate for all states, which should reduce the space for evaders.

In fact, we cannot underestimate the effects of the illegal market and the consequent tax evasion. The magnitude of the losses and what could be turned into gains for the whole society demonstrate that illegality must be permanently on the agenda of the productive sectors and the public power, which must act in cooperation in the fight against those who despise the law. . Os damages cannot be ignored, as they harm all Brazilians who bear their obligations and our expectations for the future.

The tax transaction moves forward. And the mediation?

In 2019, the Brazilian Institute of Competition Ethics (ETCO) sponsored a international study conducted by EY addressing the dimension of Brazilian tax litigation. The result was astonishing: We had R$ 3.4 trillion under discussion in the administrative and judicial spheres, thanks to the intricate tax structure, giving rise to the most varied interpretations; aggravation of fines and tax representations for criminal purposes without justification; delays in decisions; resulting in this liability of trillions of reais. There is no comparison with any other country.

It is evident that this situation severely affects our legal security: it harms the taxpayer who wants to be regularized and the treasury that he needs to receive.

In that study, the facilitation of the tax transaction was proposed (to begin to resolve this past) and the alternative mechanisms for the solution of conflicts of a tax nature, whether arbitration or mediation, to mitigate the growth of debt in the future.

In April 2020, Law No. 13.988 was enacted, which in its article 1 defines its scope: to establish the requirements and conditions for the Federal Government, its agencies and foundations, and debtors or adverse parties to carry out a resolution transaction of litigation related to the collection of credits from the Public Treasury, of a tax or non-tax nature.

After almost two years, a recent PGFN report indicates interesting results:

“Of the total amount registered in debt collected in 2021, R$ 6,4 billion are the result of tax transaction agreements. This collection strategy represented 20% of the total collected by PGFN and explains the significant growth in collection last year.

Over the last two years, the active debt transaction has been consolidated as an important public policy aimed at overcoming the economic-financial crisis intensified by the pandemic. Provided for years in the Tax Code, the tax transaction was authorized by Law No.

Regarding the impact on the business environment and on the fiscal adjustment, the assistant attorney general for active debt management, Cristiano Morais, highlighted that the strategies adopted have been solving liabilities accumulated for years - since the beginning of the transaction program, in 2019, already more than R$ 200 billion in debts were negotiated — benefiting both the government and taxpayers, always in line with the pillars of the Ministry of Economy's performance, fiscal adjustment and improvement of the business environment.

“It is a win-win process. The Union wins, the PGFN wins — which manages to bring resources to the treasury and helps with the tax, with the collection — and the taxpayer also wins, who can resume their activities. The results show that the path traced, with these strategies and approaches, has had the expected result, contributing to improve collection, improve the business environment, in addition to avoiding fraud and unfair competition”, says the prosecutor.

This report attests that the directions indicated in the aforementioned ETCO-EY study are correct and demonstrates the success of the transaction, which must be improved, expanding its scope.

However, if we move forward to resolve the past, we still need to address the future and evolve in the regulation and stability of the rules that govern conflict resolution alternatives — mediation, conciliation and arbitration — in tax matters, creating a new level of tax relationship — taxpayer in Brazil . Practices that are adopted in countries that recognize these institutes as means that meet the rapid settlement of tax debts, without the need to get bogged down in administrative and judicial instances.

We need to accelerate the pace to restructure our tax system in order to overcome the enormous litigation. Taking advantage of the results obtained with the tax transaction law, the time has come to quickly have a law that governs these alternative mechanisms for resolving conflicts of a tax nature, defining more precisely, transparently and safely rules that materialize the possibility expressed in the article 38 of Law No. 13.144/15, overcoming existing controversies, including regarding constitutionality.

Among so many challenges that the tax issue raises and that are urgent, we cannot fail to identify new solutions, overcoming archaic procedures that do not meet our most pressing needs.



You won't see any country

Culture must always be valued. Poetry, literature, music artfully express the feeling of a people and arouse emotions, giving meaning to situations that reason often cannot understand.

On my last article I used Grande Pessoa to address the issue of ethics (To be great, be whole). In this I rely on Ignácio de Loyola Brandão, in his work “No Verás País None”, to express a touch of perplexity at the latest events that haunt our beloved and suffering Brazil.

There are so many that I would have to write much more than the space I'm given allows. I will limit myself to two themes that exemplify some of the hardships that I follow closely.

We are aware that  to achieve the desired development, we must ensure legal security that allows for the attraction of investments, the generation of jobs and income. However, far from advancing in this goal, we are moving away from this goal every day. With effort, dedication and a lot of competence, we are going backwards.

Let's see the tax issue: there is always talk of the urgent need to have a "tax reform" that improves our system, is broad and simplifies the fulfillment of obligations and, of course, does not raise taxes even more.

These complex objectives will only be achieved with a broad debate, with the participation of experts in the intricacies of tax law, businessmen, taxpayer representatives, governments, civil society, politicians and that there is a meeting of accounts, all to assess the consequences, risks and the scope of the measures that will be adopted.

But here comes a package that, far from the necessary caution, promotes severe changes in the tax structure: it alters income taxation; dividends; of retained earnings; non-deductibility of interest on equity; it generates new bureaucratic procedures and will increase the tax burden, burden productive investments and, of course, in the end, consumers.

With a strong reaction from industry, commerce, services, liberal professionals, states and municipalities, opinions were presented by the rapporteur, further confusing what is incomprehensible. It's the "puxadinho" logic. Result: unanimous and cohesive repulsion, contrary to the saying that claims to be “dumb unanimity”.

But everything can get worse. The Federal Chamber decides that this matter must be voted on as a matter of urgency! Impairing a deeper discussion, with studies and technical debates.

Taxpayers and productive sectors were run over. The political logic moves away from society, with populist justifications.

Beside this unusual situation, I point out another absurdity. The Executive Branch proposes a Provisional Measure to profoundly change the structure of fuel distribution. On the one hand, allowing the direct sale of ethanol by the mills to service stations and on the other, authorizing the sale of fuel from a different source than that indicated by the banner of the service station. Hasty and inexplicable proposal.

The simple justification is illusory, the price will fall and the consumer will benefit, as if it were possible to reduce the final price without changing the tax structure that focuses on fuels. These misconceptions will encourage non-payment of taxes, a practice that plagues the entire industry.

It will be very difficult, if not impossible, to oversee the distribution chain and, in the case of the sale of a product different from that of a service station, the consumer will be deceived, as they will have the belief that they are supplying a product from a brand they trust and will receive something that does not know the origin.

This amazing initiative, which is applauded by persistent debtors, has never been defended by the industry nor by consumers. A real mistake.

Some questions: How urgent is it for such a disruptive action to be presented via MP? What are the real interests that motivate it? Have the risks been assessed?

These two examples of sudden legislative proposals remind me of Hugo Carvana's film, starring the late Tarcisio Meira, with the title: “Don't worry, nothing will work”.

Hard times. There are methods in these measures, which burden those who contribute and, without validation in studies, do not meet the legitimate interests of society, the consumer, the productive sectors, in short, those who support the State. And all this in the midst of a pandemic, high interest rates and inflation, high unemployment, institutional split, with the holders of powers in clear confrontation.

We lost the sense of planning, of priority, of doing what really matters and establishing a clear divorce between society and the state. By planting erratic rules, we reap more legal uncertainty.

As a lawyer, I am optimistic, but I have to be realistic. Yes, if we stick to this route, nothing will work and we won't have any country, at least not what we want.

Art has made its warnings, we have to listen and react.

*Edson Luiz Vismona is a lawyer, president of the Brazilian Institute of Competition Ethics – ETCO and the National Forum Against Piracy and Illegality – FNCP. He was secretary of justice and defense of citizenship of the State of São Paulo (2000/2002)

**This is content from Bússola, a partnership between FSB Comunicação and Exame. 

Specialists praise transaction, but ask for expansion of the institute

In April 2020, the 13.988 Law, which introduced in the Brazilian legal system the tax transaction institute, an alternative instrument that aims to resolve tax debt litigation. Although the mechanism has been foreseen since the creation of the National Tax Code, in 1966, it has been dormant for more than half a century and only became part of taxpayers' list of options after the law was enacted last year.

In general terms, the implementation of the tax transaction opened a new chapter in the relationship between tax authorities and taxpayers, favoring the negotiation of tax debts instead of perpetual disputes in the Judiciary. In addition, the instrument also tries to overcome the recurring needs of publishing new Refis programs — considered unfair from the point of view of tax justice — as well as allowing companies in a situation of judicial reorganization to be able to regularize their tax liabilities.

Just over a year after the institute came into force, lawyers consulted by the JOT point out that the results obtained show a tendency to consolidate the instrument as the main means of resolving tax liabilities in Brazil. According to data from the PGFN, up to the first half of July, within the scope of the active debt collection, debts that reached the amount of R$ 112 billion were negotiated, in more than 350 thousand signed agreements. Regarding individual transactions, agreements totaling more than R$ 6 billion were signed.

“Taxpayers have been interested not only in the modalities of notices, but also in individual transactions. For liabilities that are difficult to reconcile, the instrument has been sought. On the other hand, for the PGFN it has also been beneficial, because whether you like it or not, it is a way to recover credits with no prospects”, says tax expert Diego Diniz, partner at Daniel & Diniz Advogados.

One of the main reasons supporting the analysis that the instrument has also been positive for the PGFN involves the fact that, at least in this first year in force, the tax transaction focused on those credits classified by the tax authorities as irrecoverable or difficult to recover. Attorney's calculations, for example, show that the twenty Refis programs opened in the country since 2001 totaled R$ 240 billion in recovered fiscal liabilities. However, of this total, R$ 190 billion were credits classified as recoverable.

“The first impression when we talk about transactions is to compare them with the Refi programs. But here the focus is different. I'm not giving amnesty to anyone to fund themselves with government money. I am looking at situations that either the government does not expect to recover or it is a very individual situation for taxpayers”, says Andréa Mascitto, partner at Pinheiro Neto Advogados and professor of tax law at FGV SP.

From the perspective of Ricardo Soriano de Alencar, attorney general at the National Treasury, the reception of the tax transaction by civil society has been positive. "Not only because of the number of subscribers, which is substantial, or the resolution of tax credits with the PGFN and the Federal Revenue, but, in a special way, because the transaction opened a new phase in the relationship between the tax authorities and taxpayers", he assesses.

Alencar also adds that the strategies to further popularize the transaction institute in the country have caught the attention of the PGFN. “The transaction is an important tool for taxpayers, and it is sensible for everyone to be aware of its existence and its possibilities. Today, we have made an effort to publicize our actions, and we are attentive to the needs that are detected in our contact with society”, he says.

Necessary improvements

Because the tax transaction is increasingly present in the daily lives of Brazilian taxpayers and, in fact, is a more productive option to discuss tax debts, the lawyers heard by the JOT point out that some adjustments are needed for its use to grow and become more democratic.

Currently, there are three types of transaction that the legislation authorizes: (i) membership transaction for debts already registered in active debt with a value of less than R$15 million or credits arising from litigation of small value; (ii) individual transaction, for companies with debts with the tax authorities in excess of R$15 million; (iii) litigation transaction, for credits arising from relevant and widespread legal controversy, preferably that are not objects of general or repetitive repercussions.

One of the main criticisms of the institute involves the rule that, for companies to adhere to the individual transaction, the tax debt must exceed R$15 million. This base value was established by Ordinance PGFN 9.917/2020, which disciplined the rules for the tax transaction. If the sum of the debt does not reach this amount, it is only possible to opt for the transaction by adhesion.

“What bothers me most about the transaction today is the issue of the 'common grave' of adhesion being basically the only alternative for most Brazilian taxpayers. Large debtors today are, as a rule, companies that are already consolidated in the market and that have the financial capacity to pay. Why can't a medium-sized company or a micro company sit down with the attorney, either through a lawyer or through their own means, to negotiate?” asks Mariana Cardoso Martins, partner of CMartins Advogados and co-founder of the Brazilian Institute of Arbitration and Tax Transaction.

This issue is already being disputed by the Judiciary. In May this year, the 9th Civil Court of the Judiciary Section of São Paulo granted an injunction  filed by the Brazilian Taxpayers Association, removing article 4, paragraph 1, of the PGFN ordinance 9.917/2020 and allowing the execution of the individual transaction at levels lower than the established R$ 15 million. In the opinion of judge Cristiane Farias Rodrigues Dos Santos, the rule would have extrapolated the effects of Law No. 13.988/2020, creating a limitation that did not exist, which would end up violating the principle of legality.

As defended by the PGFN in the case records, the allegation should not be accepted, since the Federal Government, in "judgment of opportunity and convenience, may enter into a transaction in any of the modalities provided for in the law, whenever, with good reason, it understands that the measure serves the public interest”. Thus, the tax authorities pointed out, the financial limitation imposed by the ordinance does not offend any legal principle.

Another point of attention with regard to tax transaction rules, according to Mariana Martins, from CMartins Advogados, involves the impossibility of using tax losses or negative calculation bases to settle part of the debts. “The transaction comes to replace once and for all the need for Refills, as long as it aligns interests. In the case of installment programs, it is possible to use tax loss and negative tax base. That is why it is important for us to study opening this possibility for the transaction as well”, he says.

In the understanding of Halley Henares, president of the Brazilian Association of Tax Advocacy (ABAT), a discussion that needs to be matured in the context of tax transactions is the question of criteria for the taxpayer to adhere to or negotiate any proposal with the PGFN, especially in individual transaction mode.

"In the individual transaction, for example, there are several rules that need to be complied with, such as explaining the reasons for the request, the taxpayer's history, the equity situation, the reasons for the economic and financial crisis, financial statements, among others. But you also have to present account statements and a list of the partners' private assets, for example. I think it's a problem when you start bringing so many duties so that an eventual transaction right is granted”, he explains.

For Henares, the ideal is for a discussion to be held to think about whether all these duties "are within the power given by the legislation to the Treasury Attorney or whether they are placing duties that, due to the eventual non-fulfillment of one of them, the taxpayer is unable to individual transaction. These issues, which are very much in the ordinance [PGFN 9.917/2020], have to be worked on better"

Underexploited transaction

Among the three types of transaction currently available, the one dealing with litigation theses is the one that has the most room to grow, according to the lawyers. “I think the part that has the most to grow is the theses, because the other transaction notices will end up becoming more repetitive”, explains Daniel Zugman, a partner at BVZ Advogados.

In June of last year, Ministry of Economy ordinance No. 247 disciplined the criteria and procedures for the preparation of a proposal and execution of a transaction by adhesion in the tax litigation of relevant and widespread legal controversy. However, until August of this year, only one notice with a transaction proposal of this kind, the No. 11/2021, on the topic of “social security contributions on PLR”, was launched.

“When I look at the litigation transaction I think it is under-explored. See, I've had ordinance 247 since June 2020, but only one proposed theme. How many tax theses do we have being discussed in the Judiciary? I have 40% of the entire judicial stock in tax foreclosure and easily have a number of tax cases that exceed 30 million. It has fertile ground to explore, with the potential to finalize millions of disputes”, says Andréa Mascitto, professor at FGV.

In Article 28 of Ordinance No. 247, there are a number of actors eligible to suggest topics that may be subject to the transaction of litigation theses, such as the president of Carf, the Federal Council of the OAB, the CNJ, in addition to the president of a confederation representing a category economic or trade union centrals, qualified to appoint councilors in CARF.

According to the tax expert, it would be interesting to analyze how the first public notice issued, for PLR, brought constructive lessons for future proposals for litigation theses. This is because, after the announcement was made public, it was necessary for the PGFN issued an opinion clarifying taxpayers' doubts. “Could it be that on other occasions we can't learn what was discussed for the first public notice and expand it to a prior public discussion to have a round public notice in which people sign up?”, points out Mascitto.

In the view of Ricardo Soriano de Alencar, Attorney General of the National Treasury, in relation to the PLR ​​notice, “as it was the first experience of transaction in litigation, it is natural that the model will undergo improvements as it consolidates”.

Alencar also emphasizes that “society's participation is fundamental for the institute's maturation and it is important that there is no doubt that the PGFN is open to dialogue”.

Possibly Eligible Themes

The request of JOTlawyers listed some topics that could be the object of future tax transaction notices based on their day-to-day experiences and based on the requirements that need to be fulfilled for a thesis to be eligible. However, ensuring all the necessary metrics depends on a thorough jurimetric analysis.

Among the main rules, the following stand out: the need for the issue to have demands being processed in at least three federal regional courts, or to have at least 50 processes involving the discussion; involve amounts above R$1 billion; in addition to divergent decisions that, preferably, are not objects of general or repetitive repercussions. According to the PGFN, there are actually other topics under study. "It is not prudent, however, to anticipate them, as they are still in the technical and legal analysis phase."

“In my opinion, split-ball discussions, of interpretation of legislation, would be eligible. For example, the cases of goodwill in corporate restructuring operations, especially in a vehicle company. It is an issue that generates a lot of litigation, has a very high value involved and it is a discussion in which taxpayers have good reasons and the tax authorities too. Better than betting on the Judiciary was to reach a consensual solution”, exemplifies Carlos Daniel Neto, partner at Daniel & Diniz Sociedade de Advogados.

For Mariana Martins, from CMartins Advogados, the theses that she lists, without harming the discussions that are being matured at Carf, would be those in which there was a reversal of jurisprudence by the Federal Supreme Court last year. “Constitutional holiday third: the STF changed the understanding of the STJ and several companies had already stopped paying. Now everyone is in limbo, with the modulation issues still outstanding. But, in the event that the taxpayer has to pay retroactively, I think we should open a notice”, he explains.

Another issue that the tax specialist mentions is the inclusion of the tax on the tax base in the calculation basis of the Import Tax [theme 1.014 in STJ]. Finally, it indicates that a notice on the inclusion of ICMS in the CPRB calculation basis would also be interesting [theme 1.048 on the STF].

Daniel Zugman, from BVZ Advogados, made an analysis based on the annual inspection plan of the Federal Revenue of Brazil. “Every year, the Revenue designs an inspection plan. In it, it specifies some operations, some problems that it intends to focus more on. So in the last two or three years some operations come up repeatedly. It seems to me that in these situations it would be interesting to have a transaction proposal. Because it is already something that the Revenue has been working on and these are matters with divergent decisions”, he says.

Zugman lists the possibility or not of using an investment fund and participation for tax planning, in addition to discussions on the use of tax benefits in financial market investments by Brazilian taxpayers who have offshore.

Finally, the tax expert cites a historical controversy involving a customs question about the criteria to characterize an import by order or by account and order. “Depending on the situation your import fits into, you may have more tax benefits than another. And there is no objective criterion in the legislation defining what each of these imports is. This is a highly disseminated litigation, figures that must be hundreds of billions, and it is a discussion that impacts the entire import world. A transaction notice aiming at these criteria could be interesting, bringing some clarification”, he concludes.

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Tax transaction law brings together taxpayers and PGFN, but still has low adherence

Until October of last year, when the Provisional Measure of the Legal Taxpayer was issued, the only way for the taxpayer to obtain discounts on fines and interest on federal taxes was through special installment programs, known as Refis. As for the installment plan, there is an ordinary payment model up to 60 times, but without any discount by the Attorney General of the National Treasury.

MP 899/2019 was approved by Congress at the end of March and in April it was converted into 13.988 Law, known as the tax transaction law. It establishes permanent parameters for taxpayers to obtain discounts and installments to pay taxes that entered the Federal Active Debt category. The current stock of Federal Active Debt and FGTS is R $ 2,4 trillion, according to the most recent survey by the National Treasury Attorney General (PGFN). The value is within expectations, according to PGFN itself.

Discounts are up to 50% of the total amount, as long as it does not change the main amount, that is, the tax itself. The discharge period is up to 84 months. There are different rules for cooperative societies and Santas Casas de Misericórdia: with a reduction of up to 70% of the total amount and a term of up to 145 months. There is the possibility of total discount of fines, interest and legal charges, as long as the sum does not reach the established limits, of 50% and 70%, in relation to the amount.

“Law 13.988 brought an advantage for the taxpayer to negotiate his debts directly with the public entity, but the terms that are granted are short. So you will hardly have a businessman doing this, he will wait for a new Refis ”, says Luis Alexandre Oliveira Castelo, partner at Lopes & Castelo Advogados.

There are also complaints about the proposed discounts. "In my view, as the transaction discounts are not attractive, it is likely that we will have new bills for Refills, precisely to create greater benefits so that more people will join the program for the government to raise more money", evaluates Leonardo Andrade, partner in the tax area of ​​Andrade Maia Advogados.

Andrade also criticizes the fact that the law does not deal with precatories: "Another criticism I make is that the law does not allow the debtor taxpayer to use his precatory as a bargaining chip in the transaction with the government."

On the other hand, there is a consensus on the importance of the new law to establish a greater dialogue between taxpayers and the Attorney General of the National Treasury. “In 20 years of career, I can count on my fingers the times I managed to talk to a prosecutor. We were unable to find a communication channel with the Prosecutor's Office ”, recalls Tatiana Chiaradia, partner at Candido Martins Advogados.

“The Attorney General's Office, more than a decade ago, has set out to avoid unnecessary litigation that costs money. And he has dedicated himself to these tools that put tax authorities and taxpayers side by side in a round table, with no edges ”, says João Grognet, general coordinator of Credit Recovery Strategy of the Attorney General of the National Treasury. "I don't want the image that we are at a table where the discussion has an unsteady balance to remain."

One of the main novelties brought by the tax transaction law is that taxpayers are distinguished when negotiating payment. The debt to be negotiated is divided into four categories: A, B, C and D. “I can only give a discount for irrecoverable credit. The general rule is that recoverability is measured based on the debtor's ability to pay, ”explains João Grognet. "The payment capacity is estimated based on a mathematical equation based on the presumptive signs of economic, financial and patrimonial activity".

These rules regarding the calculation of payment capacity are present in articles 19 and 20 of the 9917 / 2020 concierge of the PGFN. Article 19 says: “the economic situation of debtors registered in the Union's active debt will be measured based on the verification of registration, patrimonial or economic-fiscal information provided by the debtor or by third parties to the Attorney General of the National Treasury or to the other organs of the Public administration".

For Edson Vismona, executive president of the Brazilian Institute of Ethics in Competition (ETCO), there is a need for high transparency in the definition of this classification. "A suggestion that may provide greater legal certainty is the creation of a channel so that possible mistakes in the framework can be reported", he says.

Debts of up to R $ 15 million can only be paid in installments. In this case, the taxpayer must accept all the conditions imposed in the notice that proposes the installment plan. The notices published so far can be viewed here. If the debt amount is greater than R $ 15 million, it is possible to carry out the individual transaction, with direct negotiation with PGFN. To know the debt situation of each taxpayer, it is necessary to access the Federal Revenue website, more specifically the Taxpayer Assistance Center, the e-CAC.

"The limit that they established, of R $ 15 million, is quite high so that taxpayers can make individual recovery requests, which are more interesting, with payment and discount bases being negotiated in a more personalized way", evaluates Fernanda Lains , partner of Bueno e Castro. “When we talk about R $ 15 million, it is a low value for taxpayers in the South, Southeast, who have a higher revenue generation. When we go to the North and Northeast regions, it is difficult to reach that limit ”.

There is one caveat that generates criticism: the fact that the taxpayer who opts for the adhesion transaction has to give up administrative or judicial litigation related to the negotiated tax. “The Law makes it difficult to maintain a judicial measure for discussing a procedural issue in cases where the merit thesis is the subject of a proposed transaction, says ETCO's Edson Vismona.

Once the individual transaction is established, negotiation is made between the taxpayer and the Attorney General's Office of the National Treasury. “An individual transaction requires numerous meetings and discussions around the text of a transaction term. It may involve local inspection at the debtor's establishment. It is not something to happen in wholesale, it is in retail ”, explains João Grognet, from PGFN. “The prosecutors are open, wanting to resolve. Years ago I did not see this availability at the Farm ”, points out Maurício Maioli, head partner in the tax area of ​​Feijó Lopes Advogados.

Until July, 204 thousand debts were transacted, from 55 thousand taxpayers, in the total amount of R $ 18,8 billion, according to the Attorney General of the National Treasury.

In June, the Ministry of Economy and PGFN published the 14.402 Ordinance, which establishes conditions for exceptional transactions because of the economic effects caused by the coronavirus. The membership period ends on December 29 and the transaction can be made on the portal regularize.

Low adhesion with taxpayers waiting for new Refills

The first special installment program was created in 2000, with the establishment of the Tax Recovery Program (Refis). Since then, around 30 special installment programs have been designed, according to a survey by the Federal Revenue Service. There have been cases where taxpayers had access to a reduction of up to 100% in interest and fines.

Given this history, a large part of those who have tax debts with the Federal Government prefer to wait for a new installment program and, therefore, the demand for the tax transaction has been low. "Of my clients, few have joined because they are expecting to get bigger discounts with a new installment program", says Leonardo Andrade, partner in the tax area of ​​the Andrade Maia office. “Many clients came to us to do a simulation, but no one did it,” says Luis Alexandre Oliveira Castelo, partner at Lopes & Castelo Advogados.

“In the short term, after this transaction law, I don't see any possibility of Refills. There is no political climate for a new Refis, ”says Mauro Silva, president of the National Association of Tax Auditors of the Federal Revenue of Brazil (Unafisco). In May, Congressman Ricardo Guidi (PSD-SC) presented the 2735 / 2020 Bill, which proposes a new installment program due to the state of public calamity motivated by the pandemic.

The proposal provides for discounts of up to 90% for late fees and official fines, late fees and legal charges, but there is no prospect of advancing the text in Congress.

There are also those who consider the terms allowed by the law of the transaction to be too short. “In the transaction law, the maximum term that the Treasury can grant is 84 months, and if it is a Simples company, up to 100 months. The old refills had terms of 15 and even 20 years ”, highlights Maurício Maioli, from Feijó Lopes Advogados.

In addition, the law resolves a portion of corporate tax debts, specifically those with the PGFN. For the time being, debt negotiations with the IRS lack regulation.

“If I am a businessman, I keep thinking 'I have a debt with the Attorney's Office, the Federal Revenue and ICMS'. This law grants me the federal installment payment in the Attorney's Office of Finance, I will still be in default both for the debts I have with the Federal Revenue, as well as for the debts I have with the state ”, reports Castelo, from Lopes & Castelo. “What benefit would the entrepreneur have? None. Because what is needed to operate in the market is the certificate of tax compliance, CND, and with this transaction it is not possible to obtain it. There is no attraction that encourages adherence to the tax transaction today ”.

On the other hand, there are lawyers who understand that the law will require a change in taxpayer thinking. "The law must evolve together with good taxpayers, who will mature with these new rules of the game that the Union is bringing to the negotiation", evaluates Tatiana Chiaradia, partner at Candido Martins Advogados. "There will have to be a change in culture, mainly by taxpayers who are badly paying," says Fernanda Lains, partner at Bueno e Castro.

“People were very used to that old Refis model. And the transaction is not that, it involves another type of dialogue with the Attorney General. Together with the taxpayer, a judicial reorganization plan will be considered, but considering tax credits ”, he says. "It is a dialogue on new bases, it is a new culture".

Transaction in litigation

Another novelty of Law 13.988 / 2019 is in article 16, which says that the Ministry of Economy may propose to taxable persons transaction of customs or tax disputes arising from relevant and widespread legal controversy.

“We are waiting for the regulation of the transaction that involves dispute litigation. This is going to be the big news. Here it will involve companies that are discussing theses ”, explains Leonardo Varella Gianetti, lawyer for Rolim, Viotti and Leite Campos.

The rules for discount and negotiation will be the same, with discount limits and classification of each debt. In this case, PGFN will classify as irrecoverable or difficult to recover credits in which there is a greater chance that the taxpayer will have the thesis accepted by the judges.

“What we are predicting is that if the taxpayer has a lawsuit in progress and will be judged by the STF on appeal with general repercussion, why will he give it up? It will be a game theory decision and case by case ”, says Maurício Maioli, from Feijó Lopes Advogados. Gianetti makes a reservation: “The problem is knowing the time of the process and whether you will win. An objective criterion that we have is the jurisprudence. It takes a long time and it is very fearful to say that the thesis is a winner ”.

Penal fines from outside

The tax transaction law does not allow discounts on penal fines. ETCO's executive chairman, Edson Vismona, believes that the law should have made it clearer what would be "penalties of a criminal nature".

“The expression 'of a penal nature' raises doubts about the limits of the fence imposed by the device”, says Vismona. "It would be convenient to clarify that only the fines imposed in the context of criminal proceedings, according to Law No. 8.137, cannot be the object of a transaction, with no restriction in relation to the qualified fines imposed by tax authorities".

Tax attorney Leonardo Andrade is also critical of this point of the law. “This type of measure ignores the practice that there are many tax plans that had the improper application of the fine. In practice, the fines were applied to any case ”, he argues. "I have several clients who had a qualified fine applied in cases where there was no crime and they will not have any benefit because it was understood in the law that there can be no discount for qualified fines", he says. "The transaction had a much smaller scope than it should have."

Article published on 21/08/2020 on the Jota Portal, in the Jota Discute session, which has the support of ETCO.