{"id":9719,"date":"2023-02-23T10:51:27","date_gmt":"2023-02-23T13:51:27","guid":{"rendered":"https:\/\/www.ronaldomartins.adv.br\/?p=9719"},"modified":"2023-02-23T10:51:27","modified_gmt":"2023-02-23T13:51:27","slug":"carf-administrative-council-for-tax-appeals-the-new-decisions-with-casting-vote-now-in-favor-of-the-federal-tax-authority","status":"publish","type":"post","link":"https:\/\/www.ronaldomartins.adv.br\/en\/23\/02\/2023\/carf-administrative-council-for-tax-appeals-the-new-decisions-with-casting-vote-now-in-favor-of-the-federal-tax-authority\/","title":{"rendered":"CARF – Administrative Council for Tax Appeals – THE NEW DECISIONS WITH CASTING VOTE – NOW IN FAVOR OF THE FEDERAL TAX AUTHORITY"},"content":{"rendered":"

INCREASE IN TAX LITIGATION<\/strong><\/p>\n

WHAT ARE THE IMPACTS ARISING FROM THE CHANGE IN LEGISLATION CARRIED BY THE FEDERAL GOVERNMENT:<\/strong> BEYOND REASONABLE DOUBT STANDARD IN FAVOR OF THE TAXPAYER?<\/strong> INCREASE IN COMPANY TAXES?<\/strong><\/p>\n

\u00a0<\/strong><\/p>\n

Provisional Measure Number 1160 of January 12, 2023, and its unconstitutionality.<\/strong><\/p>\n

Provisional Measure Number 1160, of January 12, 2023, issued by the President of the Republic during his first days in office, reinstated the figure of the so-called casting vote in favor of TAX AUTHORITY, in cases of a tie in the judgments held within the framework of the Administrative Council of Fiscal Appeals – CARF, pursuant to \u00a7 9 of Article 25 of Decree Number 70.235, of March 6, 1972.<\/p>\n

The aforementioned rule remains thus written: “\u00a7 9\u00ba The positions of Presiding Justice of the Superior Court of Tax Appeals, their divisions, their panels and special panels will be occupied by counselors representing the National Treasury, who, in case of a tie, will issue the casting vote, and the positions of Vice-President, by taxpayers\u2019 representatives.”<\/p>\n

It is important to point out that this form of judgment had been revoked by article 28 of Law # 13,988\/2020, which included Article 19-E in Law # 10,522 \/2002.<\/p>\n

However, despite the relevance of the matter, and as to the merit itself, it is relevant to analyze whether the adopted procedural-legislative path followed constitutional guidelines.<\/p>\n

\u00fc\u00a0 Provisional Measures<\/h4>\n

First and foremost, it might be useful to refer to the delimitation of the provisional measure as a normative species, its requirements and limitations, in order to analyze its unconstitutionality.<\/p>\n

The provisional measure is a primary normative species of rule provided for in Article 59 of the Federal Constitution, of exclusive competence of the Executive Branch and holds, as a requirement, the relevance and urgency of the matter to be regulated, subject to the material seals expressly provided for in the Brazilian Federal Constitution, as it brings out the constitutional limitation that prevents a provisional measure from dealing with procedural matters, provided for in the wording of the Federal Constitution in Article 62, \u00a7 1, item “b”.<\/p>\n

The constitutional legislator imposed this limit because the procedural law has immediate application, in accordance with Article 14 of the Code of Civil Procedure, which reflects the theory of the isolation of procedural acts; that is, the process is a concatenated march of acts aiming at obtaining the satisfaction of a claim,\u00a0 and it must be so considered as such for each procedural act is understood in isolation by applying the new procedural law immediately, respecting the procedural acts carried out under the aegis of the previous procedural legislation.<\/p>\n

On the theory of isolation of procedural acts, below is an excerpt of the judgment of the Superior Court of Justice:<\/p>\n

“… According to this theory – currently positive in art.<\/em><\/strong> 14 of the Code of Civil Procedure\/2015 – the new procedural law has immediate application to pending cases, safeguarding, however, the effectiveness of the procedural acts already consolidated in the form of the previous legislation, as well as the legal situations consolidated under the validity of the repealed rule…\u201d (<\/strong><\/em>REsp 1.666.321-RS<\/a>)<\/em><\/strong><\/p>\n

The decision in question is that provisional measures are not to deal with matters related to procedural law and which was passed by Constitutional Amendment Number 32\/01; however, this understanding had already been adopted by the Supreme Court, which ruled as “the use of provisional measures to change the legal discipline of the process, in view of the definition of the acts performed therein, is not lawful” (Direct Action for the Declaration of Unconstitutionality – ADI\u00a0 #1.910 Min. Sep\u00falveda Pertence) and “… the change in instrumental standards is not made on an emergency basis…” (Direct Action for the Declaration of Unconstitutionality ADI # 1,753-2 Min. Marco Aur\u00e9lio).<\/p>\n

Furthermore, legislating on procedural law is the private competence of the Legislative Branch, pursuant to Article 22, I, of the Brazilian Federal Constitution CF\/88, and, for this reason, not delegable to the Executive Branch, under penalty of offense to the principle of separation of powers and legal certainty. Even the legislative justification for the promulgation of Constitutional Amendment EC # 32\/01 resulted from the abusive use of provisional measures, an atypical activity of the Executive Branch that had been vilifying the independence of powers, as observed below:<\/p>\n

“The primary objective is to stem the tide of such practices, which are revealingly undemocratic, thereby limiting the scope of the passive matters of provisional measures….<\/em> This will inevitably result in a relief for the National Congress, along with the responsible balance between the Executive and the Legislature” (Constitutional Amendment PEC # 472\/1997)<\/em><\/p>\n

\u00fc\u00a0 Presidential Decree # 70.235\/72<\/h4>\n

In the tax sphere, the relationship between the Treasury and taxpayers must develop respecting the principles of legality, democratic principle and fundamental rights, whether in the judicial or administrative sphere, which is why the violation of legality, in matters of administrative-tax proceedings, leads to the consequent violation of fundamental rights of those involved in the legal relationship.<\/p>\n

The administrative proceedings originally arose in Great Britain from the due process of law, from an eminently procedural criminal nature.<\/p>\n

In Brazil, tax administrative proceedings were regulated by Decree # 70,235, of 03\/June\/1972, approved by the constitutional order comprehending ordinary and suppletive law status and will be subject to the rules of the Code of Civil Procedure, in accordance with Article 15.<\/p>\n

Article 15 of the Code of Civil Procedure provides that: “in the absence of rules governing administrative procedures, the provisions of the Code of Civil Procedure shall be applied in a supplementary and subsidiary basis”, so that if the special legislation contains gaps, either by default or by incompleteness, the civil procedural rules will be applied to the Tax Administrative Proceedings (PAF).<\/p>\n

Tax Administrative Proceedings (PAF) aims to resolve the claims between taxpayers and the Tax Authority, including reviewing the constitution of tax credits in favor of the correct application of the tax law, which is why it is subject to the principle of due process provided for in art. 5\u00ba, items LIV and LV of the Brazilian Federal Constitution that read: “no one shall be deprived of freedom or of their assets without due process of law” and “litigants in judicial or administrative processes as well as defendants in general are ensured of the adversary system and of full defense,\u00a0 with the means and resources inherent to it;”<\/p>\n

Therefore, due process is an instrumental guarantee, a constitutional rule of full effectiveness, which requires that the fundamental rights of taxpayers in administrative action be protected, which has been in force pursuant Law # 9,784\/99 that regulated the Lato Sensu<\/em> Administrative Procedure, for it regulated the participation of the governed party in the formation of administrative acts once only by the Public Administration.<\/p>\n

Also, Article 37 of the Brazilian Federal Constitution and Law # 9,784\/99 brought out several\u00a0 principles that apply to Tax Administrative Proceedings (PAF), among which are: the principle of legality “acting in accordance with legislation and Law = principle of administrative juridicity” and the principle of legal certainty; also, among the principles of Tax Administrative Proceedings (PAF), the principle of objective legality stands out as it “requires that the process be instituted and conducted on the basis of the law\u201d.<\/p>\n

It is necessary to remember that, in the administrative proceedings, the Treasury is usually, concomitantly, the party and the judge of the case and, although we adopt the system of single jurisdiction and the taxpayer, in case of defeat, can make use of Article 5, XXXV, of the Brazilian Federal Constitution of 1988, in order to have their claim reviewed by the Judiciary, in the light of the principle of access to justice,\u00a0 it is certain that the casting vote, \u201cresurrected<\/em>” by Provisional Measure MP # 1.160\/23, affronts due process and equality, considering that the tax legal relationship is born unequal due to the strength of the Administration, not to mention that, both the administrative decision and the judicial decision, will be subject to the final decision of the Judiciary.<\/p>\n

Thus, procedural rules aim to ensure due process, equality (principle of parity) and legal certainty, especially when seeking uniformity and coherence of jurisprudence in order to avoid conflicting decisions, a purpose implemented through the systematic binding precedents expressed in Articles 927 and 928 of the Code of Civil Procedure to mitigate gaps and antinomies.<\/p>\n

\u00fc\u00a0 Federal Supreme Court Casting Vote<\/h4>\n

Furthermore, the so-called neoproceduralism requires that all procedural rules be compatible and applied in the light of the Brazilian Federal Constitution.<\/p>\n

In the Supreme Court, Direct Actions of Unconstitutionality No. 6399, 6,403 and 6,415 filed against art. 19-E of Law # 10,522 \/2002 (included by art. 28 of Law No. 13,988\/2020) are in progress and their provision altered the system of the casting vote, determining that in the event of a tie, the administrative conflict be judged in favor of the taxpayer.<\/p>\n

In this context, such Direct Actions of Unconstitutionality (ADIs), have been a majority so far as to the recognition of the constitutionality of the legal provision questioned, because these demands adduce alleged “legislative smuggling” that would have tainted the due legislative process of production of the legal standard which marks an innovation in the legal system.<\/p>\n

Nonetheless, the point that deserves to be brought to light is the basis raised by Justice Lu\u00eds Roberto Barroso when he describes the current\u00a0 casting vote system in favor of the Tax Authority as a “rule of dubious material constitutionality” and concludes on the “absence of material unconstitutionality in the extinction of the casting vote in CARF (Administrative Council for Tax Appeals).”<\/p>\n

The casting vote gives the presiding judge of the trial session the power to untie the issue, so that in addition to voting ordinarily, the vote exceptionally decides the issue in trial. The matter of the question is that the Presiding Judge is often a representative of the Tax Authority, who might eventually vote in favor of the Tax Administration.<\/p>\n

Hence, considering that the tax legal relationship is always of an unequal nature in reference to the Imperial Power of the State, the State will still enjoy such privilege in the event of a tie, so that the procedural imbalance remains evident, with the consequent offense to the principle of isonomy and the principle of parity.<\/p>\n

In order to correct this distortion there came the normative change keeping the systematic tiebreaker; however, now in favor of the taxpayer (in dubio pro<\/em> taxpayer), mitigating the presumption of certainty of the tax assessment due to the uncertainty of the correct application of tax rules and concomitantly recognizing the tax authority interest to act and try to reverse its succumbence within the judiciary,\u00a0 in order to obtain in exaurient cognition the re-establishment of the tax assessment, thesis which has been suggested by the aforementioned Supreme Court Justice, as quoted below:<\/p>\n

“It is constitutional to extinguish the casting vote of the President of the judging panels of the Administrative Council for Tax Appeals (CARF), when the tie decision is favorable to the taxpayer.<\/em> In such case, however, the Treasury may take action to reinstate the tax assessment.”<\/em> (Direct Actions of Unconstitutionality) ADI numbers 6399, 6.403 and 6.415)<\/em><\/p>\n

Therefore, with no intent to elaborate on the supposed legislative smuggling or on the absence of administrative jurisdiction in favor of forming “administrative res judicata”, the Executive Branch cannot introduce a Provisional Measure to partially repeal such relevant rule to the Taxpayer, when there are doubts about its constitutionality, looking solely for the state’s collection purpose in favor of generating revenue to cover budget deficits generated by the misadministration of\u00a0 the managers of the public property.<\/p>\n

Thus, if the Supreme Court, The Guardian of the Constitution, has doubts about the constitutionality of the provision, if the unequal relationship between the Tax Authority and taxpayer is evident, or even in the case no final decision on the merits has been granted, the Powers need to be “harmonious among themselves”, which is why such harmonic autonomy requires that there be a dialogue between the representatives of the respective Powers so that the taxpayer can organize and better understand the rules of the game,\u00a0 respecting the principles of due process, isonomy and legal certainty since we are in a Democratic State of Law.<\/p>\n

Below is an excerpt from the Rapporteur’s vote:<\/p>\n

“… I consider the doubts as to the constitutionality of the broad admission of the casting vote in CARF trials even more relevant.<\/em> Declaring the formal unconstitutionality of article<\/em> 19-E of Law #10,522\/2002 would imply reinforce a rule of dubious material constitutionality…”<\/strong><\/em><\/p>\n

Now back to Article 15 of the Code of Civil Procedure, the re-establishment of the casting vote in favor of the Tax Authority by Provisional Measure MP # 1,160\/23 generates the suppletive application of this provision, due to its evident antinomy, combined with the ADIs (Direct Actions of Unconstitutionality) that are submitted to the analysis of the Constitutional Court, and the usurpation of legislative competence of the Executive Branch to deal with procedural matters, mainly because it is not up to a reckless,\u00a0 provisional and precarious measure to amend procedural rules for immediate effect for total offense to the principles of separation of powers, legal certainty, isonomy of due process and due legislative process (democratic principle).<\/p>\n

The democratic state of law is geared towards a provision of fair state activity, that is, the administrative procedure presupposes a case, in which there are parties, there is an appointed attorney subject to an administrative decision, whose administrative procedure is governed by procedural provisions regulated by specific and general rules, so one of the parties will succumb and the succumbence is a procedural burden imposed on the losing party of an eminently procedural nature.<\/p>\n

The Supreme Court has already recognized that they are: “rules of procedural law relating to the guarantees of the adversarial, due process, the powers, rights and burden that constitute the procedural relationship” (ADI # 2,970, Rel. Min. Ellen Gracie)<\/p>\n

Therefore, if the party loses one administrative claim by reason of a casting vote in favor of the Tax Authority, it is evident that due administrative legal process has been altered in a precarious manner by a Provisional Measure unilaterally issued by the Executive Branch, which is why its unconstitutionality is notorious, due to the usurpation of legislative competence of the legislative power and its material unconstitutionality,\u00a0 for dealing with procedural matters which strictly prohibited this normative species, generating direct offense to the fundamental rights of the taxpayer and the principle of legality\/administrative juridicity.<\/p>\n