Revenue Secretary adopts transaction that gives discounts to debtors as a ‘guideline’

In an arm wrestling match with the government’s legal area, the Federal Revenue gained authorization to negotiate, directly with its debtors, the settlement of up to R$ 1.3 trillion in tax debts through discounts and installments, contrary to the body’s historical position.

Tax representatives have always resisted debt refinancing programs, considering that they reward bad debtors and encourage taxpayers to default, harming current collections.

However, the approval for the Revenue to carry out the so-called tax transaction “has become a guideline” by the special secretary of the Federal Revenue, Julio Cesar Vieira Gomes, according to the agency informed Sheet.

“Because it is an alternative means to solve tax debts, widely adopted, the transaction became a guideline by the current Special Secretary of the Federal Revenue”, he says.

The report found that technicians are still critical of the model, considered a “mockery” with taxpayers who paid their taxes on time or had to negotiate under less benevolent conditions. They also cite the risk of the measure weakening the tax collection power.

During the process of the project, the Minister of Economy, Paulo Guedes, questioned internally the fact that the Internal Revenue Service, which used to be resistant to Refis programs, is now interested in the tax transaction.

The law was sanctioned by President Jair Bolsonaro (PL) in June this year, after the text was approved by Congress in articulations conducted personally by Gomes. The special secretary went to the field, along with members of Sindifisco (National Union of Tax Auditors of the Federal Revenue), to ensure the inclusion of the proposal in the MP (Provisional Measure) that grants discounts to Fies students.

Gomes wanted broad power to conduct transactions of any amount in the collection phase at the Revenue, which would result in an even greater amount that could be negotiated. The proposal generated a strong reaction within the economy, and a lock was fixed: the transaction can only include debts in administrative litigation, that is, that are the subject of some litigation.

Prior to the change, the tax transaction was an exclusive attribution of the PGFN (Attorney General of the National Treasury), the legal body responsible for managing the debts registered in the Union’s active debt — against which there is no longer any administrative dispute.

The instrument, created in 2020, has allowed negotiations with discounts of up to 50% of the debt, according to the taxpayer’s ability to pay. The remainder is paid in up to 84 installments.

Now, in addition to including credits in the administrative collection phase, the benefits have been expanded, with a discount of up to 65% of the debt and payment of the balance in up to 120 months. The possibility of paying off up to 70% of the remaining amount with tax loss credits or negative tax base was also included, which reduces the amount actually paid.

Behind-the-scenes reports point to a dispute over the funds raised as a backdrop for the Federal Revenue’s interest in being among the bodies authorized to negotiate.

When the PGFN completes a transaction, half of the charges collected are transferred to the fund that pays the fees for succumbence, a kind of bonus paid to civil servants in the government’s legal area.

Between 2019 and 2021, the monthly average of fees rose from R$6,016.18 to R$8,339.77. Last year alone, R$ 1.2 billion was distributed to approximately 12,300 civil servants in the legal area.

Part of the increase is due to the higher collection of charges, although technicians in the area point out that the main driving factor comes from the pure fees received in the course of other lawsuits.

Employees of the Federal Revenue also receive an efficiency bonus, but it has not yet been regulated – therefore, it remains as a fixed amount of R$3,000 monthly for auditors and R$1,800 for analysts.

In 2017, when the bonus was created, the proposal was that it be financed with funds from Fundaf, a fund that has as one of its sources the fines paid by taxpayers to the tax authorities. However, this prediction was overturned by Congress, which feared fomenting a kind of fine industry.

Critics point out that the change in the tax transaction law could serve to boost the auditors’ bonus after its regulation. Representatives of Sindifisco deny this motivation. The IRS says that the fines do not form the basis for calculating the bonus, but did not respond if this could occur in the future.

When contacted, the PGFN did not respond until the publication of this text.

The power struggle for tax collection also ended up moving away from the final version of the text provisions that sought to simplify negotiations for debtors.

​According to reports, the Attorney General’s Office wanted to include a deadline, after the transaction was agreed with the legal body, for the taxpayer to list other debts in the administrative phase, which would then be included in the amount to be settled. The IRS resisted giving up the charge. As a result, taxpayers who owe both bodies may need to file more than one lawsuit.

The inclusion of the Federal Revenue Service among the negotiators of the tax transaction also raised internal questions about the legality of the measure.

Technicians privately point out that the Constitution expressly provides that the AGU (Advocacia Geral da União), directly or through related bodies (such as the PGFN), is the institution that represents the Union judicially and extrajudicially.

The change in the law ends up, in practice, recognizing the Tax Authorities as a new representative of the Union for carrying out extrajudicial agreements.

There is also the fear of questioning involving the risk classification of debtors — a kind of note that signals the chance of the debt being paid. The new law allows both the Internal Revenue Service and the PGFN to have their own methodologies, which may result in divergent scores.

In reply to Sheetthe Tax Authorities informed that the proposal is to seek a “harmonization” with the classification system of the Prosecutor’s Office.

The president of Sindifisco, Isac Falcão, believes that the tax transaction only makes sense when it increases the chances of recovering the amounts owed. “In Brazil, the transaction is not accompanied by additional enforcement instruments [garantia de cumprimento da lei]”, he criticizes, citing the absence of punishment for those who do not fulfill their obligations.

Even so, he states that, once the transaction mechanism exists, “it must happen as close as possible to the triggering event”. “To be continued [um modelo] too bad. Now, within this anomaly that is the transaction carried out in Brazil, there was another anomaly, which is that it can only be done after being at the Attorney’s Office”, says Falcão.

The Federal Revenue Service says that “the tax transaction differs from Refis” because it is not granted in a general way, but individually, based on an analysis of the taxpayer’s economic situation and other characteristics that reduce the risk of default.

“Furthermore, the transaction for the cases of debts in litigation reduces the litigation between the taxpayer and the tax authorities, with mutual advantages”, he says.

The agency informs that it is still working on an estimate of revenue with the transaction and that, given the size of the administrative dispute, “the tendency is for the number of interested parties to be high”.