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.
Mediation is one of the alternatives for conflict resolution to avoid floods of lawsuits in the Judiciary and a possibility with little cost for companies and individuals. However, the methodology for tax cases is not yet used in Brazil. Experts interviewed by JOT claim that the difficulty of negotiating with the tax authorities means that this extrajudicial modality has a slow evolution in the relationship between taxpayers and the tax public administration.
In addition, bodies such as the Federal Revenue Service and the Attorney General's Office of the National Treasury have focused their studies and tests for conflict resolution on the tax transaction model, a modality of tax credit extinction through negotiations between taxpayers and tax authorities.
The tax transaction, according to lawyers, presents differences in relation to mediation, which opens up greater space for negotiations and, even, reductions in the values of the main tax debts. The transition, on the other hand, presents a “more rigid” model of burden reduction, despite being considered highly efficient by the public administration.
“The use of mediation requires a prior change in behavior: the parties must be open to dialogue, listen to each other, and discuss openly until they reach a consensus themselves. The mediator only helps the parties reach consensus themselves. It would, therefore, be a more advanced stage of dialogic public administration”, explains Leonardo Varella, from the Rolim, Viotti, Goulart, Cardoso Advogados law firm.
He adds that there are already normative instruments for mediation and that they can be used in the tax area as a way to reduce conflicts in the Administrative Council for Tax Appeals (CARF), an administrative court that judges federal tax cases, and in the Judiciary. The lawyer cites article 3 of the Civil Procedure Code (CPC) of 2015.
The text establishes that the “State will promote, whenever possible, the consensual solution of conflicts. Conciliation, mediation and other methods of consensual conflict resolution should be encouraged by judges, lawyers, public defenders and members of the Public Ministry, including in the course of the judicial process”.
“It's called the multi-port system. There is an instrument for that. In terms of public and judicial policy too, since since 2009 the National Council of Justice (CNJ) has encouraged the use of compositional and extrajudicial methods”, said Varella.
Also in public administration, specialists highlight the Federal Administration's Conciliation and Arbitration Chamber (CCAF), which is part of the General Advocacy of the Union. autarchies or federal foundations”, as reported on its website. CCAF is present in the states through the Local Conciliation Chambers.
Despite the initiative, the CCAF is not exclusive and specialized only in tax claims. “Probably, a tax mediation model should start with lower debts to see if it works well, with isonomy, impersonality and efficiency”, explains Varella.
For him, an advanced stage in tax mediation will only be reached when complex situations are discussed, “I find it difficult to reach this stage while the treasury administration has in mind such a rigid and rigid understanding of unavailability of tax credit”, he concluded.
With tax mediation still with no perspective of evolution in Brazil, the solution adopted by the tax authorities and taxpayers was the tax transaction. This method of resolving tax disputes is already used in the country. In May 2021, for example, the Internal Revenue Service announced the creation of an exclusive transaction model for tax discussions involving Profit Sharing (PLR), one of the most controversial theses in the tax world.
The Federal Revenue Service allows debts to be paid in installments in up to 55 months with up to 50% reduction in the principal amount, fine and interest. Another similar measure took place in the municipality of Blumenau, in Santa Catarina. The action won the 2020 Innovare award, which celebrates the main actions to improve the Brazilian justice system.
Blumenau's tax transaction model began in 2018, after being regulated by Municipal Law No. 8.532/17. So far, 1,1 hearings have been held with agreement, with the closing of 1,9 tax enforcement proceedings. The amount collected is R$2,9 million.
The transaction project in Blumenau offers discounts based on the debtor's tax history, economic condition and the municipality's chances of success in judicial collection, and can reach up to 100% on interest and fine and 70% on the principal credit.
“The main objective was to increase revenue in Blumenau, considering the moment of economic crisis experienced by the municipalities. A second purpose of the measure was to reduce the flow of small-value lawsuits through the transaction, so that the municipality's attorney and the Finance court judge could work on cases with larger amounts," explains Cleide Pompermaier, attorney-in-fact of the Municipality of Blumenau and one of the creators of the project.
The transaction project in Blumenau offers discounts based on the municipality's chances of success in the judicial collection, and can reach up to 100% on interest and fines and 70% on the principal credit.
To be part of the program, the taxpayer must have tax foreclosure filed until December 2014, with the value of the claim not exceeding 40 minimum wages. Furthermore, the taxpayer cannot be responding to a lawsuit for a crime against the tax order and have never traded municipal credits before.
"Everyone benefits from the transaction, but a point that should be highlighted is the relevance of fiscal democracy in this mechanism because with the adoption of this institute, the parties can 'sit down and talk', which was unthinkable in previous years, without counting on the humanization of the process is clearly evident in the model adopted by the Municipality of Blumenau”, said Pompermaier about the benefits of the program.
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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.
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"
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 JOT, lawyers 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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There is no company that survives without being effective in managing receivables. This attention is absolutely strategic for the balance, maintenance and progress of any institution, which must plan its flow of payments and receipts. It is no different with the State. The government must organize its accounts and act to be effective in receiving taxes and controlling expenditures, otherwise its administration and the attainment of its goals, which are absolutely necessary to achieve the necessary common good, are not feasible.
In Brazil, for decades, we have had an imbalance in this basic management equation. Our tax system has suffered distortions, with the edition of thousands of tax rules, the creation of ancillary obligations and, thus, generating various interpretations and theses that make it difficult to understand what is actually due. Result: Significant increase in tax litigation and the stock of “receivables” grows year by year. They lose the tax authorities and taxpayers.
An international study, sponsored by the ETCO Institute and carried out by EY, indicates that there are R $ 3.4 trillion in tax liabilities (only within the scope of the federal tax authorities) and that discussions at the administrative and judicial levels extend and last for almost twenty years. Other studies indicate that if we add the debts of the state and municipal tax authorities it is estimated that these debts reach R $ 5.0 trillion. Of course, a significant portion of this amount is priceless, but it is not negligible what can be received through alternative solutions: transaction, mediation, arbitration.
In a recent speech, Minister Paulo Guedes addressed the country's “tax asylum” and pointed to the need to deepen the tax transaction processes, which would have already resulted in the collection of about R $ 80 billion by the PGFN. This finding strengthens the work that is underway to overcome this unsustainable situation, allowing tax regularization of taxpayers and the collection by the tax authorities of large resources, especially at a time of deep tightening in public finances.
The reduction of this liability does not go through another REFIS, but through a real restructuring of the tax process, which makes possible not a circumstantial measure, but an institutional and effective referral, leaving the confrontation to conciliation.
So, we have to deal with the past, stimulating the transaction. We move forward with Law no. 13.988 / 2020 and both the RFB and the PGFN have been moving towards the composition of tax debts. In order to increase adherence to the negotiation proposals, tax attorneys have advocated that the situations that contemplate the transaction be expanded, that the percentage of the discount limit be increased (which is 50%) and the insertion of theses that impact great demands under discussion . Along the same lines, the agreement between the Federal Revenue Service and the National Council of Justice is auspicious, which will present a diagnosis of the litigation and the proposal to reform the tax process.
For the future, alternative conflict solutions: mediation, conciliation and arbitration must be implemented. In the aforementioned ETCO / EY study, the situation of six countries (USA, Mexico, Portugal, India, Germany and Australia) was analyzed in all (except India), these measures are contemplated, even during the inspection. It is urgent that the same occurs in Brazil.
These initiatives must be viewed by the tax authorities, legislators and the judiciary as a priority. The path is being followed, but we have urgency, even because, there are those who benefit from this situation, the persistent debtors, companies that are structured to never pay taxes and that have already generated active debts of more than R $ 100 billion (only in the sectors of fuels and tobacco).
Regardless of the tax reform, the restructuring of the tax process is necessary. The challenge is to overcome the current, aging situation, and have the boldness to approve an agile and effective structure for resolving conflicts, redirecting the relationship between the tax authorities and the taxpayer, from the conflict to understanding. Legal certainty and the reduction of this liability equivalent to half of the Brazilian GDP, will be the results, for that we have to overcome old dogmas.
Facing the lack of control of Brazilian tax litigation, which today already reaches a magnitude equivalent to 73% of the country's Gross Domestic Product (GDP), according to Insper data, must necessarily undergo a profound transformation on numerous fronts of the national tax system.
In a webinar held by Casa JOT in partnership with Brazilian Institute of Competitive Ethics (ETCO) this Friday (16/10), experts and authorities listed some of the priorities that can help reduce these disputes.
Among them are the initiative of the Attorney General of the National Treasury to tax transactions, which until August this year negotiated R $ 28 billion in debt. Speakers also stressed the urgent need for comprehensive tax reform, as well as ensuring that stubborn debtor the eventual debtor and the good and bad taxpayer.
João Henrique Grognet participated in the webinar; General Coordinator of PGFN's Credit Recovery Strategy; Breno Vasconcelos, lawyer and researcher at Insper; Zabetta Macarini Gorissen, executive chairman of the Group of Applied Tax Studies (Getap); and Ana Amélia, former senator.
It was a consensus, and it is not new, that the major and main problem lies in the complexity of the tax collection system. “There is no rich country without a legal model that guarantees predictability and security. It's impossible. And tax litigation is generated by unpredictability. How does the taxpayer and entrepreneur do to navigate in an environment so difficult to predict? ”, Said Breno Vasconcelos.
According to the lawyer, there are some factors that increase this insecurity: possibility of retroactivity in new interpretations, absence of acts that register what is the formal and official interpretation of the new tax rule, absence of effective consultation processes, the excessive duration of the processes, which today it takes an average of 19 years to complete, and the uncertainties arising from new technologies. "These are those indicated by the OECD as factors of legal uncertainty and Brazil boasts all of them", pointed out Vasconcelos.
Former senator Ana Amélia cited as an example of the complexity in collecting taxes the reality of a Brazilian businessman, Jorge Gerdau Johannpeter, of the Gerdau Group, which has a steel company in Rio Grande do Sul and another one in Canada. “In RS, he has 250 professionals for the tax area just to meet the almost daily changes. To do the same job in Canada, he needs only 3 people ”.
“This illustrates with crystal clarity the situation we are experiencing. And the foreign investor, when looking at our country, he sees not only the question of competition, but also these archaic structures that we have ”, he added.
For Zabetta Gorissen, in the last four years, Brazil has intensified its critical understanding of tax litigation, with an attempt to bring together taxpayers, the government, the National Congress and the Judiciary. "Unfortunately, litigation has become a multifaceted problem that affects everyone too much," he said.
In this sense, the president of Getap mentioned the development of mechanisms for cooperative compliance, always focused on bringing taxpayers closer to the taxpayer to more easily solve the problems faced. Zabetta also drew attention to “the great milestone” brought by tax transactions, which are a renegotiation instrument for the extinction of tax credit.
According to data presented by João Henrique Grognet, General Coordinator of Credit Recovery Strategy at PGFN, the renegotiation of R $ 28 billion in debts reached 77,4 thousand contributors and 275 thousand registrations grouped in agreements.
“It seems to me that it was very correct, with wide advantages in the Tax Court. This Justice is good in any case, but we were not finding that clarity in the previous Refis programs. After all, you give discount to those who don't need it, ”said Grognet.
According to Zabetta, a point that needs improvement in the tax transaction involves the fact that Law 13.988 / 20, which instituted the program, established a limit on the payment litigation transaction of 50% of the debt amount. “Setting this limit may slightly restrict society's appetite for this modality. But, as we always said, let's wait ”.
Expectations for tax reform
The challenge of facing tax litigation is great, but in the view of experts and authorities, this scenario will only really change after the tax reform.
“None of this will be resolved if we only work on litigation. We need to work at the source. Litigation is a symptom, not a problem in itself. It is born out of an extremely complex system, full of exceptions. Substantial tax reform is essential for Brazil to emerge from this dysfunctional and counterproductive scenario, ”said lawyer Breno Vasconcelos.
At first, these changes do not automatically mean that a new dispute will not arise, since there will be completely new legislation in force. In the view of Zabetta Gorissen, society should pay “absurd attention” so that the proposals in progress in the National Congress come out with the best possible text and eliminate the largest amount of litigation possible.
“If there is a dispute, we have to immediately go back to Congress and fix it. We are not going to do what we do today. If it doesn't work right away, you have to change the legislation, ”he said.
For ex-senator Ana Amélia, author of the Senate Bill No. 284 / 2017 to characterize the frequent debtor, the more complicated a country's tax system is, the easier it is to evade.
“In this project, we are separating two natures from the taxpayer: one that has as a religion its duty consistently, duty by profession, duty by belief. It is a form of tax evasion. It is a springboard for tax evasion ”, he said, adding that the intention of the PL is to treat taxpayers who have different behavior differently.
The former parliamentarian cited that the characterization of this type of debtor generated a fight within Congress and, because of this legislative vacuum, the Supreme Federal Court (STF) entered the debate. In December of last year, the Court established a thesis in order to criminalize the incumbent debtor, as long as there is evidence of appropriation.
“The STF made a judgment raising the penalty for the stubborn debtor in prison. In our case it was a fine, which had a lot more educational significance than the criminal issue. The Court gave a much heavier treatment than what we intended in the law, ”said Ana Amélia.
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.
Public authorities increase spending and look for ways to increase revenue. The taxpayer is unable to afford the size of the state, but mandatory and related expenses are growing. The budgetary margin narrows and tax creativity has been stimulated, with the introduction of new taxes and ancillary obligations, generating a tangle of laws, decrees, normative instructions that challenge the understanding of our tax system. The result of this equation is the tax burden that consumes 35% of GDP and investments, and the quality of services provided is not proportional to public spending. The account does not close.
Lawyers, lawyers and market experts point to a point that has not been discussed and is of great importance: the size of Brazil's tax litigation. In order to determine the amount of this problem, the (Etco) hired the consultancy EY to carry out a study.
The result showed that, analyzing the data from the Federal Treasury, the tax liability is half of the country's GDP (R $ 3,4 trillion). This amount grows every year and, moreover, there was an increase in tax representations for criminal purposes of 5% in one year (2017 to 2018) and the value of credits launched increased by 68% (2016 to 2017). The average process time, if linear until the last judicial instance, is 19 years and 2 months. These data demonstrate that we are in a well and that, instead of looking for a ladder to get out of this situation, we are, in fact, with a shovel deepening and increasing this liability. The tax authorities need resources and the taxpayer, the vast majority, wants to keep up with their obligations, that is, one needs to receive, the other wants to pay, but the existing mechanism does not allow a quick and effective exit. This situation, as absurd as it may seem, does not serve the Tax Authorities or the regular taxpayer, but it is great for the so-called persistent debtor, the one who structures himself to never pay taxes, and who uses all the procedural possibilities for that, and thus , greatly increase its profit margins, eroding competitiveness and harming the tax authorities by billions. The way out to reduce the long and costly litigation processes must first consider the feasibility of an agreement before or at the beginning of the assessment. The US tax authorities, for example, recognized for their rigor, adopt fast mediation and arbitration procedures. The goal is to set the amount due and receive. Secondly, the possibility of agreements that speed up the effective payment, regularizing the situation of most taxpayers, regulating, finally, articles 171 and 156, item III, must be made possible, with all legality, transparency and control. National Tax Code. Law 13.988 / 2020 indicates this direction. The estimate is that R $ 900 billion could be collected. With the payment in installments, for example, in ten years, the Federal Revenue Service would have R $ 90 billion per year, more than was predicted by the pension reform. Finally, in order to combat the action of persistent debtors, who should not be confused with occasional or even repeated debtors - they fail to pay taxes for economic difficulties, while the former never pays taxes, in fact, evasion makes up their disproportionate profit - , is that we defend the approval of PLS 284/17, which is at the end of the process in the Federal Senate, specifying who should be considered a regular debtor, with the exact classification by the Judiciary. In short, it is urgent that we discuss the taxpayer-taxpayer relationship, valuing those who act in good faith and punishing those who intentionally do everything to not comply with their obligations. We can no longer remain in this well that brings the financial resources of the tax authorities and taxpayers.