There is no legal certainty in Brazil – let’s accept that it hurts less. We will all be happier.
Having banned the discussion on the reduction of public spending, and firmly in the conviction of making the fiscal adjustment only on the revenue side, the Federal Government published, on the last business day of 2023, a Provisional Measure comprising three tax novelties, united by a bond Christmas: disregard for legal certainty.
The first of the measures, and the crudest, is the revocation of the so-called payroll tax exemption. This policy, which currently covers 17 sectors of the economy, was adopted in 2011 and replaces the employer’s social security contribution of 20%, levied on salaries, with rates of 1% to 4.5% levied on gross revenue. We may have criticisms of the model (I personally have them). Of course, a benefit of this type should not be granted just on the assumption that there will be an increase in the number of jobs available.
The correct option would be a control mechanism that conditions the enjoyment of the benefit to an effective increase in the number of jobs available. But what I think or don’t think is irrelevant. The fact of life is that Congress legislated, days ago, opting to extend the exemption. The President of the Republic vetoed the device and Congress overturned the veto; the checks and balances system worked perfectly.
Nowadays there is a lot of talk about saving democracy. But democracy is government by the people for the people. And if the people’s representatives are in Congress, their will must always be sovereign. It is outrageous that the Executive Branch, defeated in the debate with the Legislative Branch, makes an MP to challenge the decision of the people’s representatives.
It is true that the purpose of circumventing the legislative will is not the prerogative of the current Government. The previous one tried to do the same but was prevented by the STF, which considered that “what we have is a situation in which the President of the Republic does not accept the constitutional vector or the actions of the Legislative Power and seeks to impose his choice against what was dictated by Parliament, which is, in the current legal system, the one who has the last word in the legislative process”.
The second measure creates a monthly limitation for taxpayers to offset credits recognized by a final and unappealable decision. To justify this, the Minister of Finance alluded to the issue of compensation for amounts paid as part of the inclusion of ICMS in the PIS/COFINS calculation base, and stated that the government needs to have budgetary predictability and that, only in 2023, there was “ unexpected drop in revenue of over R$60 billion, as compensation.”
What the head of the Treasury did not mention is that the Union provisions the amounts resulting from legal actions unfavorable to it. In 2023, after discounting the values used in previous years, the budget indicated the value of R$236 billion for this thesis alone. In other words, there are no surprises. The argument is a sophistry. The leitmotiv is obviously the increase in revenue.
The person who needs predictability here is precisely the taxpayer, who after winning a legal dispute lasting more than two decades should see the court decision that determined the return of undue payments respected.
Any attempt to hinder this compensation would be equivalent to the creation of a compulsory loan – without regard to constitutional requirements – in addition to offending the res judicata itself. At least as a matter of duty of loyalty towards taxpayers, the new rule should only apply to final and unappealable decisions after its enactment.
The latest measure aims to abruptly end PERSE, a program created to compensate sectors harmed by the pandemic. Since its inception, the law that created the regime provides for a zero rate of IRPJ, CSSL, PIS and COFINS for 5 years.
What about companies that organized their business trusting the State? You cannot pull the rug out from under the taxpayer. Just to avoid situations like these, the National Tax Code provides that tax benefits granted for a fixed period and depending on certain conditions cannot be freely revoked.
Now look at the situation of taxpayers: they start the year without knowing which rule they are subject to. How can companies plan in the face of this regulatory chaos? Is it worth the PM? What will Congress say about it?
In short, this Christmas package brought restrictions on taxpayers’ rights, precisely to remind us that we live in a land where legal certainty is just a cliché. And that’s a shame, because as Tolstoy warned, respect for the past is what distinguishes civilization from barbarism.
Luiz Gustavo Bichara is a partner at Bichara Advogados.
Luiz Gustavo Bichara