Due to the severe and persistent financial difficulties faced by the Economy of Rio de Janeiro in 2017, the state of Rio de Janeiro signed the Fiscal Recovery Regime (RRF) with the federal government. Approved by Complementary Law No. 159/17, the RRF was established to give states in severe financial imbalance instruments to adjust their accounts. Thus, the state of Rio de Janeiro could have access to instruments such as:

• Rfull deduction of benefits related to debt contracts administered by the National Treasury for up to 36 months;
• Temporary suspension of legal requirements for the contracting of credit operations, as well as the limits and determinations applied when non-compliance with the limits established for personnel expenses and consolidated debt. In relation to personnel expenses, the deadline for the state to recomply with the legal limits becomes that of the RRF;
• Suspension of the need for proof, for voluntary transfers, that the state is up to date with the payment of taxes, loans and financing due to the Union, with the accountability of resources received and compliance with the limits of consolidated and furnished debts, credit operations, including in anticipation of revenue, registration in Leftovers payable and total expenditure on personnel; and
• Possibility of contracting credit operations with Union guarantee aimed at financing a voluntary staff shutdown program.

In order to have their tax recovery plans approved, states must make a commitment to restrict the increase in expenses and fulfill their obligations in accordance with the conditions established in Complementary Law No. 159/17, among which are the impossibility of:

a) granting adjustments to civil servants and public and military employees in addition to the annual review provided by the Federal Constitution;

b) creation of a position, employment or function involving an increase in expenditure;

c) change in career structure involving increased expenditure;

d) admission or hiring of personnel, subject to the repositions of management positions that do not result in increased expenditure and those resulting from vacancy of effective or lifetime position;

e) conducting a public tender, with the possibility of vacancy;

f) creation or the increase of aid, advantages, bonuses, allowances, representation funds or benefits of any kind to civil servants and civil servants and military personnel;

(g) the creation of compulsory expenditure of a continuing nature;

h) adjustment of mandatory expenditure above the IPCA or the annual change in net current revenue;

i) granting or expanding an incentive or benefit of a tax nature from which revenue waiver sits, with the exception of those granted pursuant to Art. 155, §2º, item XII,(g) of the Federal Constitution.

The postulant state has to present its Fiscal Recovery Plan, which, once approved, formalizes the program's support. The purpose of the presentation of the document is to seek the rebalancing of public accounts to meet the guidelines of the Fiscal Responsibility Law.

In the specific case of the Tax Recovery Plan signed by the state of Rio de Janeiro, the request was made in 2017 for three years, extendable for the same period. To increase revenues and reduce expenditure, the state forced itself to authorize the privatization of companies in the financial, energy and sanitation sectors; establish supplementary pension scheme; reform of pensions; review tax benefits; and limit expenditure growth, among other measures.

Even before the edition of Complementary Law No. 159/17, which instituted the RRF, the states had already signed, within the scope of Confaz, the ICMS Agreement No. 42/16, which authorizes bothsuch as the Federal District to create conditions to take advantage of incentives and benefits related to ICMS or reduce its amount.

Based on this agreement, the state of Rio de Janeiro issued Law No. 7,659/17 to impose on Rio de Janeiro taxpayers to enjoy tax benefit a deposit equivalent to 10% of the benefit to the State Fiscal Balance Fund (FEEF).

Expired the deadline (31/12/2020) provided to allocate 10% of the tax benefits to the FEEF and in due to the intense tax litigation filed by taxpayers against this requirement, the state of Rio de Janeiro, based on Complementary Law No. 159/17, issued Law No. 8,645/19 and created the Temporary Budget Fund (FOT) which, in reality, is basically the FEEF with some changes.

According to Article 10 of Law No. 8,645/19, the need to contribute to the FOT will persist while the Fiscal Recovery Regime of the State of Rio de Janeiro is in force:

"Art. 10 This law comes into force:

I - from January 1, 2020 and will take effect while the Tax Recovery Regime is in force - RRF"

However, in spite of its participation in the RRF and due to the systematic difficulty in fulfilling the considerations assumed in its plan, the state of Rio de Janeiro requested to the Supreme Court (STF), in mid-December 2020, the suspension of its RRF, which came to be deferred by the then President Justice of the Supreme Court, Luiz Fux.

Due to the widespread difficulty of states that had their fiscal recovery plans accepted by the federal government to comply with severe constraints, the National Congress issued Complementary Law No. 178/21, which implemented adjustments in the regulation of the RRF.

In April 2021, the state of Rio de Janeiro requested the Supreme Court that its Tax Recovery Regime remain suspended until there was effective regulation of the new RRF being drafted in the federal government, as established by Complementary Law No. 178/21.

The rapporteur designated was Justice Dias Toffoli, who, based on cooperative federalism, authorized the state to suspend the payment of debt to the federal government until the new RRF is effectively regulated:

"I have that the current scenario of the national economy needs an even greater effort among the entities of the federation. The so-called 'cooperative federalism' has never been more in vogue, and since the Union is competent to regulate the provisions brought by Complementary Law No. 178/21, it should not shie away from fulfilling its role in order that the recovery plans and programs offered to state entities are effective and possible, thus avoiding the collapse of the states of the federation." (Original Civil Action No. 3,457).

In June 2021, the state of Rio de Janeiro announced that it has joined the new RRF and, with it, until six months to submit a new Tax Recovery Plan, which will have to be duration of ten years. With the joining, the state will no longer pay debts with the Union and guaranteed by the federal government in the first 12 months. In the following nine years, the installments will be gradually resumed until the return of the full amount at the end of the plan.

That is, since December 2020, the state of Rio de Janeiro has its RRF suspended. Nevertheless, the contribution to the FOT continues to be demanded monthly, which we understand is not consistent with the principles of purpose, morality and transparency, since deposits for the FOT are intended for fiscal balance and should only be required as long as the RRF is in full force.

How well highlights Fernando Facury Scaff, the taxes that have linked collection, such as the deposit for the FOT, whose collection is related to the fiscal balance, must observe the link between their revenues and corresponding expenses: "Linking stems from the existence of a legal link between revenue and expenditure, so that there is a specific relationship between what is collected and what is spent the amount collected."

It is valid to clarify that we are not arguing the illegitimacy of the collection of the deposit to the FOT due to the untying of the proceeds of its collection. We know the decision of the Supreme Court in Theme 846 by the constitucionality of the maintenance of a given social contribution when the object for which it was instituted persists.

The point is, since the deposit for the FOT is linked to the fiscal recovery of the state, while the determining reason of its institution - the existence of the RRF in progress - is suspended, either by force of court order issued by the Supreme Court or the lack provided by the new RRF, there is no legal basis or reason that justifies the collection of the deposit. The imposition of the FOT, therefore, should be equally suspended, because only in this way will the principles of purpose, linkage, morality, transparency and good faith with rio's taxpayers be observed.