Law 14,689/2023 was published, reintroducing the casting vote, or Minerva’s vote, into the administrative tax procedural system.
Minerva to the Romans, known as Athena to the Greeks, in Greek mythology, was responsible for the vote that broke the tie in the trial of Orestes, declaring him innocent, in what many believe was the first judgment in history. The term came to be used to represent the casting vote and should, in essence, correspond to the wise or right choice of something.
The return of the casting vote is obviously to the detriment of the taxpayer, as it will be up to the chairperson of the panel, who is a representative of the tax authorities, to cast the tie-breaking vote.
However, Law 14,689/2023 brings other measures that mitigate the damage and are positive by determining a series of benefits to taxpayers when the administrative process is resolved in CARF, in a manner favorable to the Tax Authorities by the casting vote, as follows:
- Exclusion of fine and legal charges;
- Cancellation of any criminal complaint;
- Interest for late payment is excluded if the taxpayer pays the tax credit within 90 (ninety) days;
- In the hypothesis of item iii, the amounts can be paid in up to 12 (twelve) monthly and successive installments, with the possibility of using Corporate Income Tax (IRPJ) losses and the negative Social Contribution on Net Profit (CSLL) calculation base, as well as using a government-issued payment order;
- Tax settlement at the initiative of the taxpayer;
- Taxpayers who do not opt for the payment provided for in items iii et seq. and who have a good capacity to pay (according to the assumptions and evidence provided for by law) may dispute the tax credits without submitting a judicial guarantee, and
- Taxpayers who do not meet the requirements set out in the law and do not fall within the concept of “good payment capacity” will have to provide a guarantee; however, their foreclosure will not be allowed until the court order has become res judicata.
Law 14,689/2023 also included a legal provision that now allows taxpayers to hold oral arguments, also during judgments at the first administrative instance, before the Regional Judgment Offices, and not only within CARF, as was the case before its publication.
Below, reproducing the text in question and in illustrated form, is a short script highlighting the negative and positive points of this legislation, with red representing the negative point and green the positive points.
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MAIN CHANGES – CASTING VOTE |
DETAILS OF THE CHANGES – CASTING VOTE |
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Casting vote |
In the event of a tie in the vote on decisions handed down by CARF, the Chairperson of the collegiate body – representing the tax authorities – is responsible for proclaiming the judgment and casting the tie-breaking vote. |
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Exclusion of Fines and Legal Charges and Cancellation of Any Tax Complaint for Criminal Purposes |
Fines and charges owed to the PGFN (Federal Treasury Attorney-General’s Office) will be excluded and any tax complaint for criminal purposes will be cancelled. |
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Possibility of Exclusion of Interest on Late Payments and Payment in Installments |
Taxpayers who express an interest in paying the tax debt within 90 (ninety) days will have the benefit of the exclusion of interest for late payment. It should be noted that this amount can be paid in up to 12 (twelve) monthly and successive installments. |
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Use of tax losses and government-issued payment orders for payment |
Possibility of using Corporate Income Tax (IRPJ) losses and the negative Social Contribution on Net Profit (CSLL) calculation base, as well as using a government-issued payment order |
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Specific Tax Settlement |
Provision for the possibility of a tax settlement for credits already recorded as overdue tax liability. |
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Guarantees |
Taxpayers who are able to pay are exempt from presenting a guarantee. |
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Guarantees – II |
For taxpayers who are unable to pay, the law now stipulates that the guarantee can only be executed once the court order has become res judicata. |
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It is important to add that Law No. 14,689/2323 is the result of the passing of Bill 2,384/2023, which contains 14 (fourteen) substantial vetoes.
It can be said that all the items vetoed were favorable to taxpayers and the explanatory statement to the veto always contained the expression “contrary to the public interest”.
Among the main articles vetoed, we can highlight the following issues:
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Tax Foreclosure Law |
There was a forecast to change the wording of the tax foreclosure law, in order to ensure that the guarantees offered (surety bonds and bank guarantees) could not be settled before the final judgment had been passed. Another extremely important point would be the possibility of presenting a guarantee, in any form, only for the updated principal amount of the tax debt, which would produce the same effects as the attachment of the entire foreclosure. And, if defeated, the Treasury would have to reimburse the updated value of the expenses incurred by the taxpayer in contracting and maintaining the guarantees. The amendments would be made to articles 9 and 39 of the Tax Foreclosure Law (LEF). |
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Tax Compliance and Self-Regulation |
RFB (Brazilian Internal Revenue Department) would be responsible for providing preventive methods for taxpayers to self-regulate their main and ancillary obligations. |
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Qualified Fine |
In line with case law, the qualified fine imposed on the taxpayer in the event of fraud, intent or simulation would be reduced to 100%, with the possibility of relief. Qualified fines of 150% could only be applied in cases of proven recidivism by the taxpayer in defaulting on tax obligations. |
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Still on Fines |
With regard to fines, in cases of non-payment or inaccurate statements, there would be the possibility of reducing ex-officio fines (75%) by at least 1/3, and late payment fines (up to 20%) by at least ½. |
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Finally, it should be noted that the Constitution provides for the legislative branch to deliberate executive vetoes within the legal time limit of 30 days from the President’s message containing the vetoes and their respective reasons. Calling a joint session is the prerogative of the president of the Federal Senate, and an absolute majority of votes from representatives and senators is required for the veto to be rejected.
With these changes and many legal doubts, everyone can evaluate the costs for society as a whole, due to the increase in tax litigation and the operation of the government machine.
