While the National Congress practically paralyzed the reform agenda since the beginning of the covid-19 pandemic, the Supreme Federal Court (STF) has made a tax reform silent through the judgments in the virtual plenary of the Court highlights Estadão. Tax lawyers and legal entities complain, however, about the lack of debate and transparency in these decisions, which have changed the jurisprudence on the collection of various taxes.
The main complaints concern decisions that are considered “confusing” – based on a mixture of votes, in a judgment considered disjointed – and the change in jurisprudence in tax cases with general repercussions. Matters involving the collection of state ICMS, municipal ISS and federal contributions on which there was already an understanding based on previous decisions of superior courts – such as the Superior Court of Justice (STJ) and the STF itself – ended up having a change of interpretation in the virtual trials in the midst of the pandemic.
Among the cases with changes in relation to the previous jurisprudence, the Supreme Court started to consider legitimate the incidence of social security contributions on the amount paid to the worker related to the constitutional third of vacation. Until then, collection was not possible.
There were also several decisions that changed the rules on the use of ICMS credits, even changing deadlines that were already considered by the companies for the beginning of compensation. In a decision on the incidence of the state tax on imports of goods by unusual taxpayers, the STF even had different understandings for the validity of identical rules in the states of São Paulo and Paraná.
In a case about the municipal ISS, the virtual plenary brought votes considering constitutional the collection of the tax on the activity of exploitation of games and bets (lotteries, bingo, skips, sweepstakes, prizes), which would go against the previous jurisprudence.
For the president of the Brazilian Association of Financial Law (ABDF), Gustavo Brigagão, the overcoming of jurisprudence – or “overruling”, in the jargon of Law – should only occur when there is an extreme situation, with changes in factual assumptions or changes in laws.
“Even if there is a strong argument, this is not enough to change an entire understanding that was being applied by the courts. This jurisprudence is the basis of legal certainty between taxpayers and tax collectors,” he says. “The STF is adding more insecurity to a tax system that is already confusing and complex. Fundamentals that existed for decades have been overcome, with opposite understandings. This is bad for foreign investors, Brazilian entrepreneurs and the tax authorities.”
The virtual plenary is an online tool that allows ministers to decide on cases with just one click, away from the eyes of public opinion and TV Justice broadcasts. Its use was intensified during the presidency of Minister Dias Toffoli, who increased the types of cases that can be judged in this way. With the advance of the pandemic, the number of processes thus analyzed increased.
“In the face of the pandemic, the virtual emerged with unparalleled productive efficiency,” STF Minister Marco Aurélio Mello told Estadão. The minister was once one of the most resistant voices to the new technology, but today he defends the platform. “The virtual judgment before the need to reconcile speed and content, is considered, the endless discussions in the physical plenary, the means of surrendering to the judicial provision”, he affirmed.
At the end of 2020, 11 entities – including the Brazilian Bar Association (OAB) – sent an open letter to the Supreme Court warning of the “harmful effects of virtual judgments in the proper formation and understanding of tax precedents”. The document was also handed over to the current president of the Supreme Court, Luiz Fux.
For Thomaz Pereira, professor of constitutional law at FGV Direito Rio, the virtual plenary has qualities that physicists do not. “It is certainly worse in the sense of having less deliberation, but it has the advantage of allowing other ministers to write their votes, reacting to the vote of the rapporteur, having time for that,” he said, noting that the trials in the virtual plenary take place over days, which allows ministers to form their convictions in that period.
In the physical plenary, for example, ministers often only know how the rapporteurs will vote at the time of the trial, which can contribute to the trials being interrupted by requests for view. “As both systems have their imperfections, we are more likely to think about which processes would benefit most from being in each of the systems”, he commented.
Sought after, the STF replied that the virtual plenary session has helped to speed up decisions and has allowed the court not to stop its work during the covid-19 pandemic.
“The expansion of the competencies of the virtual plenary is recent and, as it is new, this may cause difficulties for adaptation by some actors involved. The Supreme Court understands and is always open to suggestions that can improve the progress of internal processes,” he added. the STF.
The Supreme Court reiterated that Minister Fux is in constant dialogue with the other ministers about the functioning of the virtual plenary. “It is important to emphasize that any minister can request the highlighting of virtual proceedings for judgment in the physical plenary, currently held by videoconference because of the pandemic. It is enough for a single minister to request that the trial be suspended and allow oral arguments and debates, for example”, concluded.
How does it work
Judgments in the virtual plenary session of the Federal Supreme Court take place weekly. There, the rapporteur deposits his vote and his colleagues decide whether to accompany him (with reservations or not) or to diverge. Lawyers record their oral arguments, which are made available to the public and to ministers. However, unlike face-to-face or videoconferencing sessions, there is no room for exchanging ideas and debates – nor for interventions by lawyers. “It is the worst of all worlds. If it is already very bad to have a decision overrun in itself, imagine this situation without debate, in dozens of trials. Sometimes there are seven or eight decisions a day, which would be impossible in the face-to-face plenary session” , says Gustavo Brigagão, president of the Brazilian Association of Financial Law (ABDF). “It is obvious that the minister does not read everything. We praise this good side of the STF’s agility and productivity in the midst of the pandemic. But if it is at this cost, it is better to bring the slowness back, which was very good.”
Among the decisions considered “confusing” by the specialists there are two cases regarding the collection of ICMS on electricity. The decision on the constitutionality of the collection of the IOF on factoring operations would also have been incomplete. Another case whose decision would not have been made clear to tax experts concerns the inclusion of amounts retained by credit and debit card operators in the PIS / Cofins calculation base due by companies receiving through these means of payment. Decisions on immunity at the ITBI and selectivity at the IPTU also raised doubts among experts.
For tax attorney Roberto Duque Estrada, a partner at BDE Advogados, while Congress is involved in the various tax reform proposals that are underway in the Chamber of Deputies and the Senate, the STF has touched on a tax agenda that had been held back for years. “The problem is that there is not a great taxpayer among the ministers of the STF. The last minister with prominence in this area was Teori Zavascki (died in 2017). Even with a very great fragility in relation to this, the STF decided to take advantage of the pandemic. to clear the agenda “, he evaluates.
The lawyers also question the fact that several ministers have advisors in their offices who are actually attorneys for the National Treasury or state farms assigned to the STF. “They are qualified professionals, but they still have their legal positions linked to their original bodies. So it is clear that they will have a position contrary to the taxpayer.”