By Paulo Uebel*
If you follow news and discussions about the Brazilian Supreme Federal Court (STF) on the internet, you must have often read and heard (until you get tired of it) this phrase:
“In Brazil, even the past is uncertain”.
Attributed to the former Minister of Finance and one of the fathers of the Real Plan, economist Pedro Malan, unfortunately, the phrase summarizes the performance of the Justices of Brazil’s highest Court today.
And the taxpayers, especially the businesspeople, will feel it in their skin even more intensely.
The STF has decided that sentences previously considered definitive about the payment of taxes can now change.
This is no joke!
The breaking of definitive rulings will be automatic when the STF changes its understanding of tax matters, the Court ruled on Feb. 8.
“This means that taxpayers who got favorable decisions in court to stop collecting certain taxes must immediately start paying again if the STF changes its understanding,” explained journalist Lavínia Kaucz in Estadão.
But this is not the worst part.
The worst part is that the STF is not just changing a decision from now on; they want the taxpayer to pay for the past.
As a country, we need to change a lot, and the Judiciary could set a great example of morality, predictability, and integrity.
The STF specifically discussed the Social Contribution to Net Profits (CSLL).
An example of a company that is likely to be affected by the decision is Braskem.
In the 1990s, companies like Braskem were able to get in Court the authorization to stop collecting the CSLL.
In 2007, the STF decided that the collection of CSLL was constitutional.
Thus, the Tax Authorities can now collect this tax retroactively, even from those who had a final and favorable decision.
In other words, the previous decision was worthless.
In fact, it was only valid to fool managers that they could use those resources for other purposes.
This is because most Justices voted against modulation, 6 votes to 5.
This is why the Internal Revenue Service will be able to retroactively collect taxes that were not collected in the past.
Edson Fachin, Kássio Nunes Marques, Luiz Fux, Ricardo Lewandowski, and Dias Toffoli voted in favor modulation.
Luís Roberto Barroso, Cármen Lúcia, Gilmar Mendes, André Mendonça, Alexandre de Moraes, and Rosa Weber voted against it.
The summary of the opera is as follows:
The STF is causing more legal insecurity – and, in this case, more economic insecurity as well. Many companies may go bankrupt, and the situation in the country, which is already cautious, may worsen.
The market and, above all, society need simple, clear, predictable, and serious rules to function.
Justice Luiz Fux recognizes that the STF attacked the legal security of the country with its decision, which he also recognizes causes an “absurd systemic risk.”
In a lecture at the São Paulo Union of Accountancy and Advisory Companies (Sescon), two days after the STF’s decision, the Justice showed concern for the taxpayer:
“In short, the decision is the following: if the taxpayer has something judged ten years ago, he can’t sleep peacefully because a precedent may arise that will overturn something that was judged ten, 15, or 16 years ago.”
Concerned with the very serious consequences of the decision, Justice Fux also declared:
“If we relativize the res judicata, the second and not the first [decision] is valid, why not the third, the fourth, the fifth? When will we have legal security? The so-called predictability?”
Once again, the institution that should be the guardian of the Constitution, the law, order, and legal security, fails in its mission, doing the opposite, which is to institute more legal insecurity and, consequently, generating a brutal distrust in an institution that should be admired and respected by all, as occurs in Germany, Australia, Canada, and the United States.
In the case of Pão de Açúcar, the consequences are overwhelming.
The supermarket chain that serves so many Brazilians had in its favor a decision not to collect CSLL 31 years ago.
Now, the GPA group, owner of Pão de Açúcar, foresees a loss of R$290 million, still unaudited, due to the eventual retroactive collection of CSLL.
Imagine the absurdity.
For more than three decades, the people in charge of Pão de Açúcar have slept peacefully over the decision of not having to collect the CSLL.
Instead of paying the tax from now on (which would already be a case of legal uncertainty), they have to worry about covering the hole of the retroactive collection of an impressive 31 years.
It is a bizarre situation that reaffirms Brazil as a country of absurdities and a great banana republic.
“It seems that the STF wants to change even the past, bringing uncertainty to the economy and causing company projects to be shelved.”
“There is no way to calculate the tax cost of a new product, for example, if everything can change at any time. If legal uncertainty remains, the national economy will slow down, with serious social damage,” warns the president of the Federation of Industries of the State of Rio Grande do Sul (Fiergs), Gilberto Porcello Petry.
Once again, the institution that should be the guardian of the Constitution, law, order, and legal security fails in its mission.
The Federation of Business Entities of Rio Grande Sul (Federasul), besides pointing out the consequences of the indebtedness of companies, declared that “when legal security is broken, confidence in the future is broken, with our capacity to solve social problems by generating income, with the hope of creating opportunities for all by increasing investments.
Those undertaking business act in good faith because they believe in the State and the institutions.
They should not be punished for each change in interpretation by the STF.
It is a sad penalization of honesty, good faith, the willingness to undertake, and trust in rescuing a prosperous and humane country.
I couldn’t have a better statement on the subject.
The STF is punishing the entrepreneurs who acted in good faith.
Still, it compromises not only the future of the affected companies but also the future of the economy, discouraging anyone who decides to undertake business in Brazil.
For Alexandre Ostrowiecki, CEO of Multilaser and creator of the Ranking of Politicians, this STF decision is the most dangerous of the year so far and “will break, will destroy, most Brazilian companies.”
He also worries about the effect on foreign investment in Brazil.
“If this is taken literally, it’s over for the Brazilian economy. No foreign company will invest in this country because it knows it cannot count on the tax rules; nothing is certain. Nobody will want to invest in Brazil”, says the businessman.
The worst part is that the STF is not just changing a decision from now on; they want the taxpayer to pay for the past.
The Estadão editorial also recognized the absurdity of the case.
“What seemed definitive – that the Justice himself had said was definitive – is no longer so definitive. It will always be subject to a new evaluation by the Supreme Court. The feeling is perplexing. Is there still any legal security?”
In view of all this, it is worth asking: who, besides the State – which will collect sumptuous amounts of money from the market in taxes – benefits from the STF’s decision?
Besides creating legal uncertainty and having the power to break Brazilian companies and our economy, the STF’s decision is also unfair.
Ethically and morally speaking, the Judiciary could not have the power to collect a tax that it, in some decisions, considered that the company should not pay.
This is because, with this legal insecurity we live in, maybe even begging for the law won’t solve the situation.
The major beneficiaries of this absurd decision will probably be only the lawyers and many relatives and friends connected to the Justices of the Supreme Courts who have influential offices in Brasília to lobby and act in defense of major tax causes.
This is not illegal in Brazil, although it may be immoral and ethically questionable.
Unfortunately, the conflict of interest rules in the Judiciary is ancient and outdated and leave room for unrepublican interpretations.
As a country, we need to change a lot, and the Judiciary could set a great example of morality, predictability, and integrity.
The market and society, in particular, need simple, clear, predictable, and serious rules to function.
However, what Brazil offers to entrepreneurs and citizens is the opposite: decisions about unconstitutional or illegal taxes that are difficult to understand and that tomorrow may change, placing the onus on the entrepreneur to pay for acting according to the previous decisions.
How can this country grow if it works like this? How can Brazil move forward?
Unfortunately, if it goes on like this, it has no risk of working out.
*Paulo Spencer Uebel was Special Secretary for Debureaucratization, Management, and Digital Government at the Ministry of Economy (2019-2020), CEO of Webforce Venture Capital, and Director of Finvest (2018).
With information from Gazeta do Povo