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.