Provisional Measure No. 1,160/2023 instituted the nefarious return of the tie-breaking vote, a prerogative that grants the president of the Judging Panel – a member of the tax authority – the power to decide the judgment in case of a tie, which directly violates Article 112 of the National Tax Code.

The aforementioned institute had already been banned from the legal system in 2020 through Law No. 13,988, and its return is a procedural setback, with an admittedly revenue-raising character, which imposes on the taxpayer the burden of stabilizing the public deficit and funding the increase in funds for the State, at their expense, regardless of whether they are right in disputes with the Administration that reach the CARF (Administrative Council of Tax Appeals).

Nevertheless, other aspects of the legislative innovation reveal themselves that blatantly affect constitutionally guaranteed rights and that run counter to the great efforts undertaken in the defense of taxpayers, such as the necessary pursuit of a second level of jurisdiction in customs matters, specifically concerning the application of the penalty of forfeiture, the most severe of its kind. This will be explained.

The provisional measure in question, in its article 4, introduced an amendment to Law No. 13.988/2020 with the following provision:

Article 27-B. The provisions of Article 23 apply to low-complexity administrative tax litigation, understood as that in which the tax assessment or controversy does not exceed one thousand minimum wages.     (Included by Provisional Measure No. 1,160 of 2023)

And what is the impact on the taxpayer's life?

The consequence is the impossibility of bringing claims with values below R$ 1,302,000.00 (one million, three hundred and twenty thousand reais) to the CARF, a parity body, a ceiling that was 60 minimum wages before the change, that is, R$ 79,200.00 (seventy-nine thousand and two hundred reais), a gigantic leap in terms of limiting access to the double degree of administrative jurisdiction, directly offending the right to a full defense and due process.

This is because, notwithstanding the sole paragraph of Article 23 of Law No. 13.988/2020, which stipulates that in administrative disputes of "small value," observing the principles of adversarial proceedings, full defense, and adherence to the understandings of the Administrative Council of Tax Appeals, the judgment will be carried out in the last instance by a collegiate body of the Federal Revenue Service of Brazil's Judgment Office of the Special Secretariat of the Federal Revenue Service of Brazil, applying the provisions of Decree No. 70,235, of March 6, 1972, only secondarily.

In practice, the analysis conducted by members of the same Administrative Body tends, evidently, to uphold the understanding already expressed by the lower instance. The decisions of the Regional Tax Appeals Boards (DRJs) follow the position of the Administrative Council of Tax Appeals when it is favorable to the Administration in most cases. When it comes to a contrary understanding, the ever-invoked autonomy of the Judge prevails.

Its collegiate bodies – Appeals Chambers – do not include representatives of taxpayers in their composition, and their sessions are virtual, as can be seen in Article 8 of Ordinance No. 340/2020, which irreparably undermines impartiality, equality, and the right to appeal review itself – an instrument that is based on human contingency, on the fallibility of human intelligence, reason, and memory, as NUCCI states (Código de Processo Penal Comentado, 6th Ed., Revista dos Tribunais, 2007).

At CARF, the panels are composed of members from the Federal Revenue Service and members representing the taxpayer. There are open, in-person judgment sessions that allow the taxpayer to present their oral arguments, thus ensuring the application of the aforementioned constitutional principles.

However, with the change proposed by Provisional Measure No. 1,160/2023, to bring the matter to the CARF (now again linked to the tie-breaking vote in situations of a tie), the amount in dispute must exceed R$ 1,320,000.00, which, with due respect, is a discrepancy considering the ceiling that is considered "small value" in the legal system, such as small value claims against the Public Treasury, which are those that contemplate up to 60 (sixty minimum wages) or the ceiling of the Federal Special Court, also at the same level, which was, in fact, used as a reference in Law No. 13,988/2020.

The question that remains is, what is the legal parameter to justify this chasm between the concepts of "small value" in the legal system and that established by Provisional Measure 1.160/2023?

The statement of reasons preceding the amendment does not constitute an argument adequate to provide the necessary clarifications, insofar as it justified the adoption of this value based on item I of § 3 of article 496 of the Code of Civil Procedure, which establishes the jurisdictional limit for mandatory appeals in the case of a judgment rendered against the Union or that upholds, in whole or in part, the objections to tax enforcement, and the provisions of this article do not apply when the judgment or the economic benefit obtained in the case is of a certain and liquid value less than 1,000 (one thousand) minimum wages for the Union and its respective autonomous agencies and public law foundations.

There is no reference in the wording to this being a "small value" threshold, which it certainly is not, making it clear and undeniable that this is a measure intended to prevent taxpayers from accessing the CARF, which until now was proudly considered a more equitable, technical, and fair body.

In the explanatory memorandum of Provisional Measure 1160/2023 itself, there is an assumption that the implementation of such a limit aims to reduce in approximately 70% (seventy percent) the number of cases referred to the Administrative Council of Tax Appeals, which could reduce the average time for the organ to enter the flow to 2.27 years. And, in this vein, further reflection is proposed, in order to identify whom this measure seeks to benefit, without observing any legal criteria. Certainly, it is not the taxpayer, who already enters the administrative legal-procedural relationship in an unfavorable situation, since the presumption of legality and veracity already operates in favor of the Administration, in light of the principle of Public Interest.

This scenario, of mitigating access to the Administrative Council of Tax Appeals, basing the complexity of cases solely on their value, is even more serious when considering demands in customs matters, especially regarding the application of the penalty of forfeiture, the most severe, because when imposed in its essence, that is, on the goods, there is no longer any provision for appeal, according to Decree-Law No. 1,455/76.

And there is involvement from activists in the area to ensure that the provisions contained in the Trade Facilitation Agreement are effectively implemented, the Amendment to which was enacted through Decree No. 9,326/2018 and establishes the following:

APPEAL OR REVIEW PROCEDURES

1. Each Member shall ensure that any person against whom Customs issues an administrative decision has the right, within its territory, to:

an administrative review or appeal to a higher administrative authority, independent of the authority or department that issued the decision.; and/or

(…)

3. Each Member shall ensure that its appeal or review procedures are conducted in a non-discriminatory manner..

5. Each Member shall ensure that the person referred to in paragraph 1 is informed of the reasons for the administrative decision, so as to enable that person to have access to appeal or review procedures, when necessary.

In other words, since March 2018, the country had already committed itself, by virtue of the WTO Trade Facilitation Agreement, to ensuring taxpayers the right to review or appeal by a Superior Administrative Authority against a decision issued by a Customs Authority, i.e., a non-disciplinary authority, undertaking to guarantee that such appeal or review procedures would be carried out in a non-discriminatory manner, which has not yet been implemented in relation to the application of the penalty of forfeiture based on Decree-Law No. 1455/76.

Instead of progressing in this direction, the opposite is actually happening. With the aforementioned change, in cases of fines substituting for forfeiture penalties governed by Decree-Law No. 70.235/72 that do not fall under the jurisdiction of the CARF (Administrative Council of Tax Appeals), the analysis will be carried out practically in the same way as under the procedure of Decree-Law No. 1.455/76, since there are no taxpayer representatives on the Appeals Chambers of the Regional Judgment Offices. Everything will be analyzed by members of the Federal Revenue Service, that is, those linked to the customs enforcement authority, which violates not only the aforementioned constitutional principles but also an International Treaty to which the country is bound.

Under Article 60 of the Vienna Convention, in force in the country since 1965, a violation of a Treaty can be understood as the pure and simple repudiation of the commitment, as well as an affront to a provision essential for the execution of its object and purpose to be achieved. This innovation in the legal system is an undeniable example of a violation of Article 4 of the Trade Facilitation Agreement, since it will prevent access to review or appeal, by way of example, of an administrative decision that applied the penalty of forfeiture converted into a fine, due to the jurisdictional limit. One of the most relevant demands in the customs area is precisely the opportunity to have decisions that apply the harshest penalty re-examined, a prerogative that the taxpayer enjoyed in cases of substitute fines, a right that is now undermined by the exorbitant pecuniary limitation.

It should be noted that the Revised Kyoto Convention, in force by virtue of Decree No. 9,326/2018 since the date of its publication, ensures its signatories, among which is Brazil, in addition to the right of appeal, the right to submit their grievance to an adjudicating authority independent of the customs authority, and this provision is challenged by the limitation of jurisdiction, which now subjects the judgment to the Appeals Chambers of the Regional Judgment Offices, a measure that is expected to be reviewed.

It is unacceptable to ignore the commitments made by Brazil to the international community and, especially, to the Federal Constitution, in the interest of revenue collection, thus mitigating the importance of the cornerstones of the Democratic Rule of Law. Failure to do so would set a dangerous precedent against the Constitution and taxpayers, who are increasingly powerless in disputes with the Public Administration. It is up to the Judiciary to restore balance to this equation.

Article by Laura Ivasco, Lawyer, graduated in Marketing Management in Foreign Trade in 2004 from UNIBERO/SP and in Law in 2010 from Anhanguera/SP Mackenzie/SP. OAB/SP nº 312.237.