Source: DCI, 24/06/2009

One of the biggest torments of the Brazilian taxpayer is in obtaining negative certificates of tax debts. In this respect, the disproportion between taxpayer and tax authorities appears more clearly than ever. While the first only remains to pay the tax, the second always has the interposition of an obstacle to the fulfillment of its obligations, such as those of accepting the lawful and legal compensations, those of promptly returning the overpaid taxes, those of provide the necessary information, just to name the most common ones.

Even though the situation is better than it was two years ago, which resulted from successive and constant complaints, it is still an ordeal to obtain from the tax authorities a document attesting to the taxpayer's regularity.

The legal basis for negative certificates is found in Law No. 7.711, of December 22, 1988, regulated by Decree No. 97.834, of June 16, 1989, and Decree No. 99.476, of 1990, which conditioned a series of acts to obtaining a "proof" of the discharge of federal taxes and "other compulsory monetary charges".

Among these acts are those of the transfer of domicile abroad, participation in tenders, registrations with the commercial agencies, notaries of titles and documents and real estate of certain documents and loan operations with public institutions.

In January 1990, the National Confederation of Industry was brought before the Supreme Federal Court (STF), a direct action of unconstitutionality against the ADIN law (nº 173-6, Distrito Federal), alleging its unconstitutionality.

The lawsuit was distributed to the then minister, Carlos Madeira, who did not grant an injunction to suspend the provisions of the law, which had been requested before the merits were judged.

However, in March 1990, the plenary session of the Federal Supreme Court unanimously understood that the preliminary injunction should be granted, reporter then Minister Moreira Alves.

Thus, Article 1 of the Law was suspended, which required “proof” of payment of federal taxes as a condition for the legal acts mentioned above. In November 1990, another ADIN was distributed by the Brazilian Bar Association, OAB (nº 394, Distrito Federal) with the same request, so it was joined to the previous one.

With the retirement of Minister Moreira Alves, both actions were redistributed to Minister Joaquim Barbosa, who took them to the plenary to discuss their merits, which ended up on September 26, 2008.

The plenary session of the Federal Supreme Court unanimously understood that article 1 is unconstitutional (as well as its items I, III and IV and paragraphs 1, 2 and 3).

The reasons why the Supreme Court thus decided are in accordance with its long and indisputable jurisprudence that the tax authorities cannot impose political sanctions as a condition for the exercise of economic activity, such as that which requires “discharge” of taxes for the formalization of acts and legal business.

The taxpayer can always discuss the validity of a given tax requirement, both at the administrative and judicial levels. Thus, it cannot be penalized for the fact that it is asserting its right of access to justice to obtain a decision contrary to that of the tax authorities.

In addition, the tax authorities have privileges to collect their credits, with tax foreclosure and the attachment of assets.

Despite this decision by the Supreme Federal Court, certificates continue to be required for acts of registration with notaries and commercial boards.

The natural inertia of the bureaucracy, combined with the fear of taking official administrative decisions, without provocation by third parties considered to have been harmed and seeking judicial measures, means that the decision of the highest Court is awaiting concrete measures that make it effective.

Meanwhile, thousands of acts and legal transactions continue to await, across the country, the issuance of certificates that prove the absence of tax debts.

In addition to the negligence of this situation, there is a complete lack of justification for the requirement.

What can the mere change of name of a legal entity, or of headquarters, or decision to capitalize reserves, have in reference to the discharge of taxes?

Would the act of registering with a real estate registry be something so important that it deserves to be known whether the owner paid the National Social Security Institute (INSS) or not?

It is interesting to note that many of these acts represent an increase in equity, which should make the tax authorities more relaxed about the possibility of receiving their credit.

In that sense, it should facilitate its formalization, not the other way around.

The realization of this reality, as well as other indications of the Brazilian love for bureaucracy devoid of intelligence and meaning, only increases the chorus of many foreign companies that continue to affirm (and rightly, in many aspects) that Brazil is a “difficult country and complex ”to do business.

Administrative authorities that should be attentive to judicial decisions and apply them greatly contribute to this situation, instead of remaining inert, awaiting judicial provocation.