In the opening article of the monthly column "Carf's Judgments", the theme could be no other than discussions involving the “casting vote”. The existence of a tiebreaker that favors the tax authorities, or the taxpayer, has long permeated the debates on conflict resolution within the Administrative Council of Tax Appeals (Carf).

Carf's collegiates are peer public entity, formed, in the regimental composition, by the same number of advisors representing taxpayers and the National Treasury. This composition presupposes the search for a balance in the interpretation of the tax law, ensuring a neutrality of the analysis. The point is that parity often results in a tie in the trial, resulting in the need for a tiebreaker criterion.

Until the edition of Law 13.988/20, the only tiebreaker criterion existing for the carf trials was the "casting vote", which attributes the prevalence of positioning in the manifestation of the President of the Collegiate (art. 25, §9 of Decree 70.235/72). As, by provision of the Carf Internal Rules, the President of the Collegiate is always a representative of the National Treasury, the prevalence of his vote raised questions about the existence of a bias in the decision to be handed down.

Law 13.988 introduced Article 19-E in the drafting of Law 10.522/02, creating a second tiebreaker rule: in the case of administrative process judgment of determination and charge of the tax credit, the controversy will be resolved favorably to the taxpayer.

In our view, this new criterion can be understood as an unfolding of the legal rule provided for in art. 112 of the National Tax Code (CTN), which contains the maximum in dubio pro taxpayer. If there is no certainty as to the basic elements of the act, such as the legal capitulation of the fact; the nature or material circumstances of the fact; authorship; the nature or graduation of the applicable penalty, the tax law must be interpreted in the most favorable manner to the accused.

It happens that, after the publication of the new tiebreaker rule, the Ministry of Economy published Ordinance 260/20, establishing that the tiebreaker criterion in favor of the taxpayer would be applied exclusively in tax administrative processes of tax credits (release and notice of infringement). The other disputes to be resolved in the administrative body (compensation proceedings, discussions on procedural issues, etc.) would be resolved accordingly the old criterion of prevalence of the collegiate president's vote ("casting vote").

Throughout 2021, when cases with more relevant discussions gradually were returning to the Carf agenda, the effects of the coexistence of these two criteria were verified in practice.

Several controversies that have historically been resolved in favor of the tax authorities have come to have a final solution favorable to the taxpayer, among them: the possibility of deducting interest on retroactive equity (Judgment 9101-005.757), the regularity of the 30% lock for compensation in the event of extinction of the legal entity by incorporation (Judgment 9101-005.728) and the application of international agreements for the purposes of taxation of profits earned by subsidiaries and affiliates in  (Judgment 9101-005.809).

These same matters, when judged in the context of a compensation procedure, were resolved with the application of the criterion of tie-breaker of the vote of the President of the Collegiate, most often favoring the tax autorities (e.g. the recent judgment of Case 16682.720821/2011-35, which dealt with the deductibility of goodwill in the calculation basis of CSLL and, although it was analyzed by the same members of the 1st Superior Chamber of Tax Appeals (CSRF), it had a result opposite to Judgment 9101-005.894, of the previous month).

The relevance of this theme seems to grow in the same proportion of the limits of values for non-face-to-face judgments. As Carf expands the ceiling for non-face-to-face trials (currently r$ 36 million), more complex issues return to the agenda, and the criterion for resolving the trial becomes worth tens (or hundreds) of millions.

This relevance was recently accompanied by urgency: the Supreme Court (STF) took to March 23 the continuation of the trial of direct actions of unconstitutionality (ADIs) 6399, 6403 and 6415, which discuss the constitutionality of art. 28 of Law 13.988/20, a rule that "extinguished" the casting vote. The discussion within the Supreme is placed in two aspects: formal and material.

The formal unconstitutionality is defended by the fact that Article 28 of Law 13.988/20 was inserted in the text of Provisional Measure (PM) 899/19 by parliamentary amendment and already in the phase of conversion into law, without the original theme of PM having a relevant relationship with the tiebreaker criterion, which represents a violation of due process of legislation (what is called "legislative smuggling" or "jabuti").

Thus, the Attorney General's Office (PGR), the Brazilian Socialist Party (PSB) and the National Association of Fiscal Auditors of the Federal Revenue Service of Brazil (Anfip), which are the authors of the ADIs in question, point out that the device that instituted the pro-taxpayer tiebreaker was inserted into Law 13,988/20 improperly, without the legislative power to debate. Former Minister Marco Aurelio joined this current and voted for formal unconstitutionality.

The material unconstitutionality is defended based on the premise that the application of this new criterion favorable to the taxpayer would configure cancellation of the tax credit every time there is a tie, which would imply the prevalence of the private interest in the face of the public interest. Furthermore, it is claimed that the principles of due process and the legitimacy of the administrative act would be violated.

The constitutionality of the rule under discussion is justified by the restoration of the balance of the relationship between the tax authorities and the taxpayer in the administrative sphere since the system of tiebreaker by casting vote generated a distortion in favor of the Public Treasury. With the new system, the protection of the taxpayer's fundamental rights and guarantees against any excesses committed by the State is expanded.

This was the vote given by Minister Roberto Barroso, who understood that it is constitutional the new system of tie-breaker favorable to the taxpayer, provided that it is possible for the tax authorities to resort to the judiciary.

The judgment of these actions brings a series of discussions: if the unconstitutionality of the rule that "extinguished" the quality vote is declared for cases in which tax collection is discussed, how will those processes that have already been terminated by application of the device declared unconstitutional be treated?

On the other hand, in the event of a declaration of constitutionality, is there also a likelihood that the tax authorities will be allowed to turn to the judiciary to challenge decisions given in favour of the taxpayer?

The judgment of this theme by the Supreme Court is expected with high expectations, because its outcome is very relevant for the solution of tax conflicts in Brazil.