Originally published in the April 13 edition of World Tax Daily (Copyrights Tax Analysts)
Out of billions in tax assessments, Brazil collects less than 5 percent from taxpayers in the year of assessment, according to an April report.
The Union of the Federal Revenue Department’s Tax Analysts (Sindicato Nacional dos Analistas Tributários da Receita Federal, or Sindireceita) released the figures, which are based on reports from the Federal Revenue Department (FRD).
According to Sindireceita, such poor tax collections are due to the various appeals available to taxpayers. These appeals postpone payment of assessed taxes for several years at the administrative level. Thereafter, taxpayers may revisit the entire tax case before the judiciary, which often postpones the case’s resolution for several more years or even a decade.
In 2008 alone, the FRD assessed BRL 75.6 billion in taxes but collected only BRL 2.8 billion, most of which related to previous years. The current inventory of assessed taxes under litigation totals more than BRL 430 billion, according to Sindireceita President Paulo Antenor Oliveira.
Oliveira said that the FRD is not understaffed but that there is a problem with how FRD staff is allocated. He said tax laws do not need to be changed. Rather, the FRD should reassign agents performing bureaucratic work to activities that enable a quicker resolution of tax cases.
São Paulo Changes State Tax Procedures
To expedite the resolution of tax cases, particularly those focusing on the state VAT (ICMS), the state of São Paulo has enacted new legislation (State Law 13,457 of March 18, 2009-04-07) that changes the structure and procedures of the State Tax Court of Appeals, the highest administrative court within the State Treasury Department.
The new state law implements electronic controls and procedures and reduces from six to four the number of judges that review each tax case and procedural deadlines. The reduction of judges per case should make more judges available to review other cases. Currently, 11,000 cases are pending judgment before the São Paulo State Tax Court of Appeals, cases valued at a total of BRL 30 billion in assessed taxes, penalties, and interest.
The new law also reduces from three to two the number of appeal levels within the structure of the São Paulo State Treasury Department. This should help to expedite the resolution of ongoing cases.
David Roberto R. Soares da Silva