In a previous article, we referred to the Brazilian tax authorities’ use of precautionary tax measures in situations where payment of debts to the federal revenue were thought to be at risk – though at the time such action was rare.
Since then much has changed, and the stance now taken by the tax authorities indicates clearly that their objective is to intimidate taxpayers and deter them from disputing tax assessments in the administrative or judicial courts, instead settling disputes as quickly as possible.
It is clear that the attempt to deter taxpayers from disputing federal tax demands began with a reform of the Administrative Tribunal (CARF), so as to reduce or even eliminate taxpayers’ chances of successfully challenging assessments in that court.
No sooner had the reform of CARF been completed than a programme, known as PRORELIT, was created to reduce the number of challenges to federal tax demands.
Under the PRORELIT scheme for reducing litigation, the taxpayers are encouraged to waive their right to challenge federal tax assessments in court in exchange for the possibility of paying a minimum of 30% of the tax demand in cash, and being allowed to offset the remaining 70% against tax losses.
Continuing the list of measures intended to avoid or terminate challenges to tax demands in the courts, the Office of the General Counsel to the Treasury, in conjunction with the Federal Revenue Department, increased the pressure on companies, managers and controlling shareholders and published a series of regulations which contain infringements upon taxpayers’ rights.
These include Ordinance 1265/2015; Joint Ordinance 1427, which is intended to identify assets held in Brazil and overseas; and, finally, RFB Ordinance 1441.
Information was published on the Federal Revenue Department’s website stating that $5 billion in assets belonging to tax debtors would be subject to precautionary tax measures, and that a further $77 billion were in the sights of new “appropriate legal measures”.
The fact is that the precautionary measures and other restrictive actions are being used as a way of minimising the rights of taxpayers to enter into litigation, in the administrative or judicial sphere, in view of the urgent need of the Executive Power to raise taxes: shortage of cash is forcing it to implement a fiscal dictatorship that is unprecedented in the history of Brazil.
Big Brother is well and truly watching.
Joao Marcos Colussi (jmarcos@mattosfilho.com.br; +55 11 3147 7553) is a partner at Mattos Filho, Veiga Filho, Marrey Jr e Quiroga - a principal International Tax Review correspondent firm for tax controversy issues in Brazil.
