The package of economic measures announced by the Finance Minister, Fernando Haddad, to rebalance the public finances risks meeting resistance in the National Congress. The most controversial points of the proposals are the so-called casting vote – the government’s power to tie tax disputes to the Administrative Council of Tax Appeals (CARF) – and the low volume of spending cuts. The 2023 Budget forecasts a deficit of 231.55 billion reais in the public accounts.
The proposals announced by President Luiz Inácio Lula da Silva’s economic team last Thursday (12) are in three provisional measures, two decrees and two interministerial ordinances. In the most controversial case, that of the decisive vote, foreseen in one of the parliamentarians, there was no articulation between the economic team of the PT government and the Congress.
Parliament’s resistance could be a problem for Haddad and his team, because a significant part of the success of the tax package measures depends on reducing disputes between taxpayers and the IRS – which could be partially resolved with the return of the casting vote in the Carf. With the mechanism’s extinction in 2020, the government stopped raising around R$60 billion a year, according to Haddad.
By resurrecting the casting vote, the Union increases the chances of increasing collections with the victories of the Revenue Agency in trials, since the representatives appointed to the body by the government would have the power to break the tie in disputes. Currently, around BRL 1 trillion in taxes are being discussed at Carf. The measure will be analyzed by the Legislature until, at the latest, the beginning of May.
André Félix, a lawyer specializing in tax law, believes that the government’s forecast on the return of the casting vote to Carf is optimistic and that the provision should not pass through the National Congress.
For the expert, the economic team burdens the production chain and goes against the decisions of the Legislative Power. “The decision in favor of the taxpayer is fairer and more honest. In addition, the economic team wants the administrative process to be ratified and the infringement notifications to be kept. This will lead to nothing, it will increase the litigation. [a medida] it will not pass in the National Congress because it has not passed on other occasions”.
“There hasn’t been the slightest debate. The minister did not speak to the other economic sectors to understand how the tax administrative process works and gave an opinion on the equal composition of Carf. There is a lot of talk about greater participation by society in politics, but the minister wants to reduce it”, declared Félix.
Read the analysis: Haddad shows weakness and indecision in the first pronouncements
“Interfering with a casting vote is a huge disrespect to Congress, which legislated this two years ago,” says tax lawyer Luiz Gustavo Bichara. For him, this measure is based on the assumption that CARF is a body that must help with state revenue.
“It is not. The CARF is a body that must judge the collections according to the law with tax citizenship”, criticizes Bichara, a member of the commission of jurists set up by the Senate to reform the legislation on administrative and tax procedures.
In the wake of the decision, the business class is already moving to lobby Congress to ban the measure. The group of entrepreneurs Esfera Brasil, for example, has launched an appeal to the presidents of the Chamber of Deputies, Arthur Lira (PP-AL), and of the federal Senate, Rodrigo Pacheco (PSD-MG), why they don’t do it». condemn Brazil to further delays”.
“This is a serious and profound setback in what had been a great achievement in the name of investment, job creation and economic growth,” the group said in a statement.
Congress profile
Economist Alessandro Azzoni said he believes the proposals will face resistance in the new Congress, which will take office on February 1, mainly due to the profile of the new legislature’s parliamentarians, who are aligned with the centre-right.
Read also: Haddad’s economic package is a ‘disappointment’, experts say
Ozzoni highlights another issue he sees as a problem with Haddad’s proposal. The government wants the end of Carf’s resources for disputed amounts of less than R$ 15 million, so that the dispute will automatically end after the taxpayer wins in the first instance. “Except that, according to administrative law, the Revenue Agency must appeal until the last resort. In this case, failure to appeal can constitute prevarication”, he underlines.
Another controversial point concerns the cut in expenses calculated by the Finance Minister. Despite the projected budget deficit of BRL 231.55 billion, the economic team proposes a cut of only BRL 50 billion. Most of the deficit reduction would come from an end to litigation with the IRS.
“The announced spending cut is small compared to the gigantic machine we have. It’s not expected, but it’s a start, all the more so considering that the PT makes governments more focused on increasing public spending,” Ozzoni said.
tax recovery package
Among the interim measures and ordinances issued by the government to reduce the BRL 231.5 billion deficit in the public accounts, are:
• Start the Zero Litigation Programwhich will allow taxpayers to pay taxes with the state and, at the same time, bring resources into the public coffers;
• Focus on extinction of official resources for debts of less than R$ 15 million, which will allow the automatic elimination of about a thousand processes before the Administrative Commission of Tax Appeals (CARF), for an amount of almost R$ 6 billion;
• Back with the deciding vote on Carf. In practice, the government increases the chances of victory of the Revenue Agency in the judgments, which will increase the collection. There is currently around R$1 trillion in taxes under discussion at Carf.
*With information from the State Agency
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