The CARF, the body responsible for judging administrative appeals at the federal level, is made up of Chambers and Sessions composed of representatives from the tax authorities and the taxpayer, in even numbers, which sometimes results in ties in the judgments.
In the event of a tie, as stipulated in Article 25, §9, of Decree No. 70.235/1972, it was the responsibility of the President of the Chamber or Session, a member appointed by the National Treasury, to cast the deciding vote, even though he had already voted, thus calling into question the impartiality of the decision. This was because the vast majority of decisions were made in favor of the tax authorities.
Furthermore, due to this bias, some of these decisions were reviewed by the Federal Court of the Judicial Section of the Federal District, as we can see below.
“"The judgment handed down by the CARF (Administrative Council for Tax Appeals) in an appeal decided by a tie-breaking vote violates several principles of constitutional stature, such as due process, equality, reasonableness, and democracy.".
(Federal Judge Diana Wanderlei, substitute federal judge of the 5th Federal Court of the Judicial Section of the Federal District)
“"Objective doubt regarding the interpretation of the tax-related legal fact, by virtue of the law of general rules, could not be resolved by a tie-breaking vote against the taxpayer. Upon verifying a tie, the panel should have proclaimed the judgment in favor of the taxpayer."”
(Federal Judge Renato C. Borelli, substitute federal judge of the 20th Federal Court of the Judicial Section of the Federal District)
“"In this case, it was understood that the tie-breaking vote would be a kind of double vote, which would give the president the power, after voting and, if the result is tied, to vote again, thus breaking the tie. However, such an interpretation cannot be maintained, as it blatantly violates the most basic democratic principles of law."”
(Federal Judge Edna Márcia Silva Medeiros Ramos, Federal Judge of the 13th Federal Court of the Judicial Section of the Federal District)
All decisions unanimously affirm that the tie-breaking vote violates democratic principles of law, as it creates an imbalance between the tax authorities and companies within the process. It is well known that the taxpayer is the most vulnerable party in this relationship, often being compelled to produce negative proof of the facts imputed to them, due to the relative presumption of the administrative act.
Minister Luís Roberto Barroso has also expressed his opinion on the matter:
“"What has been presented so far can be summarized as follows. Assigning two votes to the same individual within a collegiate judicial body violates the constitutional guarantee of impartiality, a corollary of due process, because: (i) it confers double influence on one person in the decision, maximizing the risk of bias instead of minimizing it; and (ii) the second vote will necessarily be the same as the first and not the result of a new, free and autonomous assessment of the elements presented by the interested parties in the case file.".
(In The attribution of double voting rights to a member of a collegiate judicial body and due process of law. Ibrac Journal – Competition, Consumer and International Trade Law, vol. 16. São Paulo: RT, January 2009, p. 45).
Therefore, there is no doubt, the MP 899/19, which inserted the art. 29, The ruling, published on April 14, 2020, only served to restore legal order, meaning that in the event of a tie, the judgment should be decided in favor of the taxpayer –“in dubio pro contribuinte”.
“In the event of a tie in the judgment of the administrative process for determining and demanding tax credits, the tie-breaking vote referred to in § 9 of article 25 of Decree No. 70,235, of March 6, 1972, does not apply, and the matter is resolved in favor of the taxpayer.”
That's because, art. 112, Article 102, paragraph 1, of the National Tax Code already stipulated, "Tax law that defines infractions, or imposes penalties, shall be interpreted in the manner most favorable to the accused (...).".
Therefore, in the case at hand, there is no doubt that the Internal Regulations of the CARF (Administrative Council of Tax Appeals) cannot, under any circumstances, override the provisions of the National Tax Code, and these decisions must be reviewed by the Judiciary.
Although a small percentage of cases are decided by a tie-breaking vote, according to data from the CARF website itself.[1], "According to the PGFN, from 2016 to 2019, approximately R$ 89 billion in tax credits were upheld by the tie-breaking vote, only in the panels of the Superior Chamber of Tax Appeals."“[2], This demonstrates the importance of the change brought about by Provisional Measure 899/19.
Article by Juliana Perpetual, Lawyer, graduated in Law in 2003 from the Centro Universitário das Faculdades Metropolitanas Unidas – FMU. Areas of expertise: Customs Law, Tax Law, and Criminal Law. OAB (Brazilian Bar Association): 242.614
Research sources:
[1]http://idg.carf.fazenda.gov.br/dados-abertos/relatorios-gerenciais/2020/dados-abertos-202004.pdf
[2]https://www.jota.info/tributos-e-empresas/tributario/voto-de-qualidade-e-extinto-no-carf-14042020
