ETCO MAGAZINE - ISSUE 24

Patching won't do any good

Federal deputy Efraim Filho (DEM-PB) is confident in the progress of tax reform in the National Congress. He bases his optimism on the leading role that the Chamber of Deputies has taken in relation to the pension reform, which he hopes to see repeated in the tax agenda, and in the maturing of the issue with society.

Efraim addressed the matter in the lecture that ended the seminar on Taxation in Brazil, promoted in partnership with ETCO and the newspaper Valor Econômico. In his assessment, the problems of the Brazilian tax system are already well diagnosed and it is necessary to “now go on to therapy”.

The deputy said he believes that the backbone of the reform will be PEC 45/2019, prepared by the Center for Tax Citizenship (CCIF), under the coordination of economist Bernard Appy and presented by deputy Baleia Rossi (PMDB-SP). He estimates that the report of the Special Tax Reform Commission, which is part of it, must be presented to the Chamber by the end of October.

Efraim recognizes that the topic is difficult, involves many interests and raises complex issues from an economic and legal point of view. But it advocates a profound change, rather than more specific and infraconstitutional changes. "Making a patch will not do any good, because a patch on rotten fabric tears," he compared.

The deputy also criticized the vision of privileging the State's tax collection interests, in discussions on tax rules and inspection, neglecting the private initiative. "The productive sector today is seen with a presumption of guilt," he said. "It needs to be valued." Efraim, who chairs the Mixed Parliamentary Front to Combat Smuggling and Counterfeiting, also spoke about the importance of the country facing the illegal market that reduces tax revenues, causes unfair competition and puts the population's health at risk.

Check out some excerpts from the lecture:

Protagonism of Congress

“The role that Congress assumed in the pension reform will also be reflected in the discussion of tax reform. President Rodrigo Maia, today a great believer in the stability of this country - within Congress, in the relationship between powers, in dialogue with foreign investors -, has called to Congress and to himself the responsibility to move forward in tax reform. ”

What reform proposal?

“As soon as President Rodrigo Maia takes responsibility and asks his main leaders to subscribe to Bernardo Appy's proposal, brought by Deputy Baleia Rossi, who heads the PMDB, it becomes the backbone of this debate . This is feeling, not information. ”

Think outside the box

“For me, we still see many things being thought, to use the very modern expression, 'inside the box'. You have to look from the outside, you have to try to conceive something new. Patching won't do any good, because a patch on rotten fabric tears. Patching rotten fabric will generate a new hole. It is necessary to have the concept of trying to make a proposal that is new possible. ”

Valuing the productive sector

“It is necessary to prioritize those who produce in Brazil. Whoever produces in Brazil can no longer be the villain of history. He needs to be seen as a hero. Hero of the resistance. The productive sector today is seen with a presumption of guilt. ”

“For some time now, Brazil has only been thinking about the rule to make life easier for the State. It's wrong. The rules today are to facilitate collection. They are not to make the taxpayer's life easier, nor for simplification, nor for him to be able to maintain his business without having to evade. ”

Fight against smuggling

“The cigarette sector, for example, how to admit that the illegal market occupies practically 60% of the market? You stop collecting taxes, you stop generating jobs, it's a lose-lose game. ”

“Smuggling, counterfeiting, piracy, the illegal market, everything is extremely harmful to society, and the worst thing is that our society, which is tolerant of small deviations, even feels sorry for the smuggler, because the first image that comes is that of the DVD, CD seller. ”

Relationship with organized crime

“When you break the superficial shell and go to the heart of the crime of smuggling, it is there who finances organized crime, drug trafficking, generates currency evasion, loss of revenue, deteriorates the formal labor market, creates health and integrity risks consumer. ”

Enough tax litigation

Tax reform discussions often focus on changes in the types of taxes and how to share the burden and distribute resources across society. But they usually leave aside an extremely relevant aspect for the development of the country: the legal security of the tax system.

Brazil is one of the world champions in conflicts between tax authorities and taxpayers. Experts estimate that, in all administrative and judicial instances in which these differences are discussed, the amounts involved already reach R $ 3,3 trillion, which represents about half of the country's GDP. And the trend is for growth.

To contribute to this discussion and the search for solutions to the problem, ETCO held in June, in São Paulo, the Taxation and Legal Security seminar. The event brought together great lawyers in the search for solutions to the problem.

Heleno Torres, professor at the Faculty of Law of the University of São Paulo (USP), spoke about the points that should guide the improvement of the Brazilian tax system, including the solution of conflicts in tax processes.

Roberto Quiroga, lawyer and professor at USP's law school and Fundação Getúlio Vargas of São Paulo (FGV Direito SP), gave a lecture on the interpretation of the legal standard.

Humberto Ávila, also a professor at USP, dealt with the principles of legal tax security and its relationship with economic development.

Hamilton Dias de Souza, lawyer and counselor at ETCO, presented a critical view of the tax reform proposal under discussion in the National Congress (PEC 45).

Gustavo Brigagão, professor of law and president of the Brazilian Association of Financial Law (ABDF), addressed the international tax challenges in the face of technological innovations of the XNUMXst century.

The seminar was coordinated by the president of the ETCO Advisory Council and former secretary of the Federal Revenue (FHC government), Everardo Maciel, who highlighted the importance of the theme: “It is the most relevant for the country in terms of investment, especially in the tax field . ”

At the opening, the Institute's executive president, Edson Vismona, drew attention to the two extremes of the problem: on the one hand, taxpayers who seek to do everything within the law, but suffer from the complexity of the system, the tax authorities' arbitrariness and constant changes in the norms or in their interpretations - and they often end up paying taxes that they should not while awaiting final decisions of Justice; and on the other hand, regular tax debtors, who do not pay due taxes, use the complexity and delay in decisions to make money illicitly. “The motto of the first is: 'I must not, I deny, but I pay'; the second is ´devo, I don´t deny it and I don´t pay´ ”, summarized Vismona.

In the links below, we present a summary of the main points addressed by each speaker. The full content, including video and transcript of the lectures, is available HERE and will also be converted into a book. The objective, as explained by the chairman of the ETCO Board of Directors, Victório De Marchi, at the end of the seminar, is “that these ideas, these suggestions, these proposals be taken to our legislators to see if we can get a tax system compatible with international needs ”.

The event was supported by ABDF, Ajufe (Association of Federal Judges of Brazil) and CESA (Center for the Study of Law Firms).

The videos of the lectures and their transcript can be accessed  HERE

 

 

 

“The tax authorities cannot collect even 1% of the active debt”

The head professor of the Department of Economic, Financial and Tax Law at the Faculty of Law of the University of São Paulo (USP), Heleno Torres, spoke in his lecture on the conflicts between taxpayers and the tax authorities, the administrative and judicial process and tax reform . He regretted that the projects under discussion are too focused on the creation of the value added tax, without paying due attention to issues related to legal certainty. In his opinion, Brazil needs a system that brings more predictability to economic activity, allowing “people to know exactly what are the taxes they must pay and what are the obligations they must fulfill in relation to the taxes that are due and, at the same time, at the same time, constitute a state of security, a state of normality, where the business environment can favor new investments and the breadth of business expansion in Brazil ”.

He argued that changing the current system respects five principles:

    1. Actual non-cumulative taxation, with a tax incidence that allows universal credits to be taken, that is, financial credits in all operations.
    2. Single rate throughout the circulation process.
    3. Reduction of exception regimes, such as tax substitution.
    4. Revision of the tax benefits model.
    5. Simplification of ancillary obligations.

Heleno Torres drew attention to the need to control excesses of the tax authorities. "The National Tax Code, for example, lacks a chapter on the inspection process and procedure, which gives taxpayers more candid rights over the limits of inspection and the action of the tax authorities in administrative relations," he said.

The tax attorney told the case of a client who, after being warned twice by the inspection that his business should be classified as a financial institution, decided to change his corporate name to fit into this category. During this process, he was surprised by CARF's decision against the change, claiming that the company did not meet the requirements of a financial institution. "The tax system cannot lead taxpayers to such a contradiction," he warned. “These contradictions aggravate the business environment, heavily aggravate taxpayers with the sum of fines, interest, charges, lawyers' payments and so many other repercussions and, in fact, this is not what is expected from a tax system with legal certainty. "

Reform consultation system

Heleno highlighted the urgency of a reform of the consultation system to make it effective in resolving taxpayers' doubts and reducing conflicts. “We need to reformulate the consultation system very urgently, to take advantage of this opportunity so that, from the moment of the presentation of the notice of infraction, or even the launch, there is the possibility for the taxpayer to start his challenge, so that this is speedy, to the extent where the market also needs quick tax decisions, ”he said.

He talked about the need for greater uniformity of understanding in the judgment of tax lawsuits, to avoid that equal cases have different results in different instances. And he recalled that the current situation is also of no interest to the State, which does not receive tax debts, nor to society. “There is not a single state, a single municipality in the country where the active debt has a collection higher than 1% of the accumulated volume. In other words, the conflict does not matter to the tax authorities, ”he said. “The tax that does not enter the public coffers spontaneously is missing from the public budget. And, when there is a lack of two in the public budget: either we have tax increases or we have contingencies until that revenue enters the public accounts and that budget can meet these expenses. Either way, society loses. ”

At the end of the lecture, in a brief conversation with tax attorney Everardo Maciel, the event's coordinator, he answered a question about the integration of the administrative and judicial stages of tax processes. "If this is to simplify, to reduce litigation, it is urgent that we simplify the processes in this universe so complex that it is the administrative and judicial litigation", he concluded.

Legal certainty against state discretion

The lawyer and professor Roberto Quiroga, from the University of São Paulo and from the FGV Law School of São Paulo, dealt with the legal uncertainty in the interpretation of the tax rule. “Today, we have a tax dispute that has already reached R $ 3,3 trillion: half of a Brazilian GDP. So, two ways: either the taxpayer is misinterpreting the legal norm or the State is exaggerating the application of the legal norm ”, he said.

Quiroga recalled that the relationship of forces between the State, which has the prerogative of self-protection, and taxpayers is uneven. “We are not talking about a private relationship between A and B where I have to seek the State of Judge to resolve a conflict. The State launches the tax, the State has the right to self-protection, ”he said.

He criticized the instrument for modulating the effects of decisions of the higher courts, whose purpose of promoting legal certainty was being submitted to the convenience of public accounts. "It is the institute that I least believe in, because decisions can be made by nose," he said. “If modulation is an idea to provide security, it also gives insecurity. It creates such a condition that I don't know what the interpretation I am going to give and when it will be valid. Whether for the future, the past or the present. ”

Quiroga defended the so-called “guarantor” of the Brazilian Constitution. “Of course, we have to look at the state side. But the legal security we are talking about is the security that the constitutional text gives to the taxpayer. Against agency, against state authority ”, he justified.

Ten different votes from the STF

The tax attorney also criticized the lack of conceptual basis for decisions made by the different judging bodies, including the CARF (Administrative Council for Tax Appeals) and the Supreme Federal Court, mentioning issues in which there is great confusion in the jurisprudence. He cited, as an example, the taxation of profits abroad, appreciated by the plenary of the STF. “He decided nothing. He just confused everyone, ”he said. “Ten different votes. Today, I don't know how to tell my client how to tax profits abroad. ”

After the lecture, Quiroga answered the question from the seminar coordinator, tax attorney Everardo Maciel, about the consultation services offered by the tax authorities to taxpayers. He criticized the lack of preparation of the professionals who carry out this work and the risk of acting in part due to the fact that they work within the collection agency. “If I have a predetermined consultant to say no, the institute is worthless. Perhaps there should be a competition for consultants ”, he suggested as a means of making consultations more effective and impartial.

"Understandable, stable and predictable right"

Full professor of Tax Law at the University of São Paulo Humberto Ávila is one of the greatest Brazilian scholars on the subject of tax security. With an academic trajectory that includes doctorate and postdoctoral studies in Germany and postdoctoral studies at Harvard, in the United States, he is the author of the book Theory of Legal Security, with 744 pages, a “true treatise on the subject”, in the words of the chairman of the ETCO Advisory Board, Everardo Maciel.

In a lecture at the Taxation and Legal Security seminar, Ávila addressed three aspects that she considers essential for tax legal security. "There is security only when the law is understandable, stable and predictable," he said, attributing these factors to the relationship with time.

Understanding concerns the present: "The right to be followed must be at least well understood".

Stability, with the passage from the past to the present. “The taxpayer who trusts the law yesterday cannot be betrayed by the law today. For this reason, the right protects the acquired right, the perfect legal act, the res judicata, the protection of trust, the consolidated situations, the preclusions, prescriptions and decadences ”, he exemplified.

Predictability refers to the transition from the present to the future. "The taxpayer, when he acts, needs to minimally predict what are the consequences that will fall in the future on the acts he practices in the present," he said.

Didacticism of the courts

Then, he pointed out the main problems that exist today in Brazil in these three dimensions. He criticized the practice, common in the country, of not looking for the precise meaning of words and thus allowing for very elastic possibilities of interpretation. "There is no country in the world that is developed and in which words have no meaning," he warned.

Citing a recent decision by the United States Supreme Court, which instructed the courts of that country to declare laws that were badly formulated by Congress instead of trying to correct them, argued that a large part of the problems of legal insecurity seen in Brazil today are due to the lack of determination of the Judiciary to demand more quality in Legislative decisions.

“Do you know why in Brazil the legislation is bad? Because the Federal Supreme Court does not declare the laws unconstitutional because they are bad, ”he said. “We have to recover the didactic role of the courts and start declaring the unconstitutionality of rules that are contradictory, that are too vague, too ambiguous. Because the taxpayer has to guide himself or his behavior based on some direction. ”

Ávila condemned the practice of federated entities of instituting or increasing taxes through regulations, not laws, as required by the Constitution. He also criticized changes in orientation in jurisprudence that produce retroactive effects, violating taxpayers' rights.

At the end of the lecture, in conversation with Everardo Maciel, he drew attention to the risk that the country is taking with the institution of modulating the effects of judicial decisions to protect the state's finances. According to Ávila, this instrument encourages the State to disregard the Constitution, which ends up benefiting financially from unconstitutional laws. “The right has many effects, one of which is to define what is right and what is wrong. Now, if right is equal to wrong, I wonder what kind of citizenship there will be in Brazil and what kind of exercise of public power there will be in Brazil ”, he pondered.

"Should reforms be disruptive or timely?"

Hamilton Dias de Souza, a member of the ETCO Advisory Council, spoke about the principles he believes should guide tax reform and criticized the proposed project in the Chamber of Deputies (PEC 45). He recalled that the country is faced with two possibilities: making a comprehensive reform, which he called “disruptive”, involving profound changes in the federal pact and in the Constitution; or make specific changes to correct the problems already identified in the current model. He defended the second alternative. “I don't think that a tax reform should abolish concepts that are already established. Especially because these concepts often take twenty, thirty years to settle, ”he said.

Citing divergences that still persist in the current system, such as the return of amounts charged excessively in the tax substitution regime, the collection of ISS on leasing operations and the creation of federal contributions by ordinary laws, warned of the risk that a radical reform introduce new points of legal uncertainty without solving the old ones. “When there is a disruptive tax reform, changing all concepts, we can all imagine what will happen. How long will it take for all these things to settle, and how businessmen, taxpayers, how we can all organize our lives, ”he said.

In relation to the proposal, inserted in PEC 45, for the creation of a national tax, the IBS (Goods and Services Tax), replacing federal, state and municipal taxes, Hamilton expressed his understanding that the change violates the constitutional clause of the Constitution , which prevents “amendment to abolish the federation”. “There is a jurisprudence in the Supreme Court that says: when you weaken, when the federation weakens, there is a tendency to abolish it. Therefore, "tending to" is "diminishing power", "weakening autonomy" ", he argued. In his assessment, by reducing the autonomy of states and municipalities to institute and freely change their taxes, IBS fits this definition.

Double complexity

Hamilton also questioned the argument that tax unification would bring about the necessary tax simplification, noting that it provides for a ten-year transition period with the overlap of the two systems. “We will have the coexistence of IBS with all other taxes replaced: ICMS, IPI, PIS, Cofins, Service Tax. Therefore, with compliance costs for both tax systems and inspections for both taxes. I would say that the poor taxpayer will surely suffer a lot ”, he said.

Other changes foreseen in the proposal, according to Hamilton, may cause new points of legal uncertainty, such as the migration of taxation to the destination of products and services, the application of IPI to primary products and the creation of a new tax on “special consumption”. “And what will special consumption be? Whatever the legislator of the future wants. It starts as a selective tax, and then the selective tax starts to reach even reasonably essential products ”, he warned.

The tax attorney warned of the extraordinary increase that PEC 45 proposes for the taxation of the service sector, in comparison with what is currently practiced. "The maximum tax burden, which is 5%, the next day would become 25%, and we would have a 500% increase on services," he said.

Hamilton also dealt with issues that he considers problematic in the current system, such as the distortion of the use of funds collected through fees, the excess of freedom to impose taxes by provisional measure and the increase in taxes for acts of the Executive.

Then, he listed some principles that the tax reform should obey to improve the business environment and bring more legal security to the country: simplification, harmony of the rules of the administrative / tax process, transparency and neutrality.

At the end of his lecture, the event coordinator, Everardo Maciel, asked him if the IBS proposed in PEC 45 could be compared with Simples, in order to respect the constitutional principle of the federation. Hamilton showed the distinction between the two tributes. “Simples does not absolutely prevent the existence of a normal institution of taxes by the Union, states and municipalities - not least because it is optional”, he replied. And he reaffirmed his view on the unconstitutionality of IBS.

The challenges of taxing the digital economy

The lawyer, professor of law and president of the Brazilian Association of Financial Law (ABDF), Gustavo Brigagão, spoke about the past and future of taxation. He outlined a brief historical overview of the choices made by Brazil in tax matters and the reflexes they produced in terms of legal uncertainty. He then addressed the new challenges facing the world in the field of taxation.

"Our tax system dates back to 1965, when the world was completely different," he recalled. “The goods were tangible goods that circulated between industry, wholesale and retail, until they reached consumption. The service was the result of human activity, necessarily. ”

At that time, according to him, while most countries were moving towards a national value-added tax, Brazil chose to create separate taxes for each federative entity - IPI, federal; ICM, then ICMS, for states; and the ISS, municipal. In Brigagão's assessment, this choice created many of the legal problems that would arise in the following decades, as the economy became more complex and the federal units began to dispute the right to tax the new activities that came into existence.

He cited several conflicts and their coming and going through the courts, such as the distinction between goods and services, the characterization of the place where the services are provided and the definition of inputs. Then, he presented a long list of new challenges that countries are facing due to the globalization and technological revolution of the last decades. “These new technologies have made the tax system, not only the Brazilian one, but the international tax system, chaotic”, he commented.

According to him, innovations such as e-commerce, cloud computing, internet of things, 3D printing, software subscription, streaming services, rental of properties by application, sale of consumer data, digital advertising and cryptocurrency have brought a series of tax challenges that still do not find satisfactory answers anywhere in the world. “Today, the merchandise can be sold via email. And printing is done at the consumer's home. In other words, the chain that existed for the circulation of goods becomes a chain of values, ”he said.

International initiatives

To scale the size of these businesses, he recalled that the five technology giants that make up the acronym GAFAM (Google, Amazon, Facebook, Apple and Microsoft) had a turnover of US $ 767 billion in 2017. “This is equivalent to the GDP of Switzerland”, he compared.

Brigagão highlighted three specific characteristics of these businesses that impose great difficulty on their taxation: not needing a physical presence in the country where the service is provided; have most of its value concentrated in intangible assets; and generate revenue from the user himself. “Providing data from these participants creates value that makes these companies worth billions. Whether through the use they make of this data, or through advertising, the level of audience that the marketing of these companies can reach ”, he explained.

He gave an account of the initiatives being studied or proposed by organizations such as the OECD, the G20 and the European Council and others recently adopted by countries like France, Spain and the United Kingdom to tax these new businesses. But he stressed that they still do not point in a clear direction on the best way to tax these companies.

Brigagão also spoke about the difficulties that global companies have in understanding the Brazilian system and made an assessment of the tax reform proposals under discussion in the country today. He defended the adoption of VAT to solve some of the main problems of the current model, such as yours complexity and cumulativeness, and recalled that it is adopted by 165 of the 193 countries in the world. But he considered the way it is proposed in PEC 45 to be inadequate and possibly unconstitutional.

Investor understanding

At the end of the lecture, tax attorney Everardo Maciel, coordinator of the seminar, reinforced the points brought by Brigagão about the challenges that countries face to tax the technology giants. However, he presented a point of view contrary to the adoption of VAT, considering it a tribute from the past, while recognizing the problems of the current system. "We are discussing the 1949 solution for the XNUMXst century," he noted.

Brigagão agreed with the obsolescence of VAT, but reinforced his criticism of the cumulative nature of national taxation and returned to defend its adoption to solve problems that affect the development of Brazil. ”I would very much like to be able to tell foreign investors that we have a form of taxation that is compatible with what they know. And today I can't say that ”, he lamented.

Light on tax litigation

The dispute between the tax authorities and taxpayers has been growing. The time in which these disputes are discussed in the administrative and judicial spheres remains extremely long. And Brazil appears in a very unfavorable situation, in terms of tax litigation, in a comparative analysis with developed and developing countries.

These are some of the preliminary conclusions of the study that ETCO commissioned consultancy EY (formerly Ernst & Young), to make a diagnosis and point out ways to reduce litigation between tax authorities and taxpayers, entitled Challenges in Brazilian Tax Litigation - Main Challenges of Practice of Tax Litigation and Potential Mitigating Measures in Brazil.

The work analyzed official government information, studies on the topic carried out in Brazil and information collected by EY offices in other countries and should be presented to society in October. The focus was on federal litigation.

“From 2014 onwards, we see a significant increase in the number of assessments, but that is accompanied by an increase in the content of tax litigation litigation”, says Natalie Branco, senior manager of Business Tax Services at EY. According to her, this shows that the greater rigor of the tax authorities is not necessarily resulting in an increase in cash for the Federal Government.

Taxes represent the main factor of legal uncertainty for Brazilian companies, according to a study carried out by FGV in the 2014 balance sheets of publicly traded companies. That year, the amounts discussed in tax lawsuits amounted to more than R $ 283 billion, about seven times the amount in litigation in labor lawsuits, for example.

Half of GDP

A first point that draws attention in the study is the speed of the increase in federal tax litigation, which has grown 51% in the last five years. In 2013, the stock at the federal level was valued at R $ 2,275 trillion, which was equivalent to 42,7% of GDP. Last year, it reached R $ 3,440 trillion, corresponding to 50,4% of the wealth generated by the country.

“It is evident that the divergences in the interpretation of tax rules and tax collection processes have reached an unsustainable level of dysfunctionality”, says ETCO's executive president, Edson Vismona. “This creates enormous legal uncertainty in the productive sector, removes investments, compromises the collection of the State and generates useless expenses for everyone. The taxpayer, if he does not accept the launch criteria, contests, and the State, which needs to receive it, runs out of resources. ”

 

 

 

 

 

 

 

 

The study will also provide details on a possible and worrying correlation between the criteria adopted by the tax auditors' bonus model and the increase in tax credits issued by the tax authorities. The amount went from R $ 122 billion in 2016 to R $ 206 billion in 2017, the first year of payment of the bonus. An increase of 68%.

In the same period, there was also an increase in so-called tax representations for criminal purposes, an instrument that takes the discussion of taxes to the criminal sphere. The abusive use of this device is considered a way to coerce the taxpayer to pay even the taxes that he considers undue.

"We defend that the tax authorities are strict with those who actually owe taxes," says Vismona. "But we vehemently repudiate practices instituted aiming only at the State's revenue interests or corporate interests." The ETCO president recalls that undue charges are an important cause of disputes between taxpayers and the IRS.

Two decades

The study will also analyze the delay in the processing of tax cases in different instances, which is around twenty years.

Among the several reasons that explain the high degree of litigation, we highlight the large number of changes in the rules regarding taxes that happens in Brazil. A survey carried out by the Brazilian Institute of Planning and Taxation and cited in EY's work accounted for 390.726 federal, state and municipal tax rules created between 1988, the year in which the Federal Constitution was promulgated, and 2018. An average of 774 rules per business day - or 1,92 XNUMX per hour.

The research also makes a comparison of the Brazilian situation with that of six other developed or developing countries - Germany, Australia, United States, India, Mexico and Portugal -, chosen for presenting characteristics similar to Brazil or for representing good examples of tax legal security . “Other countries have alternative conflict resolution measures that impact the number of assessments discussed by taxpayers and the stock of tax litigation, as will be shown in the study”, says the senior manager at EY.

The work will also bring proposals that can be considered to reduce litigation in the Brazilian tax system, including a mapping of the projects under discussion in the Legislative and in the Federal Revenue that are moving in this direction. “We did this research to contribute to the discussions about the change in our tax system that should occur in the coming months”, justifies the president of ETCO. "Tax reform must also carry the flag of legal certainty."