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Why is the Brazilian CARF ruling against taxpayers more often?

Alessandra Gomensoro, Mattos Filho

Alessandra Gomensoro of Mattos Filho discusses the increase in cases being judged against taxpayers at the Brazilian Administrative Council of Tax Appeals (CARF), its root causes, and solutions for taxpayers.

The CARF is a body of the Ministry of Finance in charge of judging administrative appeals filed against tax deficiency notices related to the collection of federal taxes.

Judgments at the CARF are carried out by collective bodies, having a parity composition, and are formed by an equal number of judges appointed by the tax administration and by taxpayers.

In recent months, we verified an increase in the number of cases judged against taxpayers based upon decisions rendered by a casting vote. In the event of a tie vote, the chairman of the collective body, who is always a judge appointed by the tax administration, has the prerogative of the casting vote to untie the judgment.

Application of the casting vote is made as follows: Votes by all judges are collected, including the chairman’s and, in the event of a tie vote, the chairman votes again.

However, taxpayers have been expressing concerns about the manner in which the casting vote is applied at the CARF, feeling that it constitutes a double voting event, ultimately resulting in biased judgments in favour of the tax administration.

The casting vote, as applied at the CARF, ends up conferring the decision power over the tax assessment to a single council member representing the tax administration, which contravenes the requirement of a judgment of the appeal by a collective body having a parity composition.

Furthermore, a tie vote in a judgment should entail a result in favour of the taxpayer and not the opposite, in view of the principle of in dubio pro reo.

In this connection, the Brazilian Supreme Court has already recognised, in a case involving a criminal matter, the non-applicability of the casting vote when contrary to the defendant, and that doubt in such cases should favour the defendant. We expect this understanding to be applied also to tax cases.

Other judging courts in Brazil also use the so-called casting vote when there is a tie vote, but never with dual attribution to one of the judges.

Both the Federal Supreme Court and the Superior Court of Justice admit that the application of a casting vote in situations where, upon a tie vote, the chairman of the session – who would otherwise be solely in charge of presiding the judgment – is given the opportunity to cast a single vote to untie the discussion, the so-called casting vote.

In the light of such situations, taxpayers, whose assessments of federal taxes are sustained by the CARF in reliance upon a casting vote, are resorting to judicial courts to discuss the matter and obtain favourable decisions that can either be judged again, or the collection of a fine in those cases be annulled.

This article was prepared by Alessandra Gomensoro ( of Mattos Filho, International Tax Review’s disputes correspondent in Brazil.

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