In recent weeks, the Brazilian National Treasury Attorney General’s Office has received approximately 2.4 billion reais (458 millions) of tax payments. This is a significant boost for federal revenue at the start of this year.
These agreements were made with banks like Itau and Santander Brasil. They also included Citibank. The agreement put an end to long-running legal battles that had required both parties to spend a lot of money.
Officials at PGFN claim that payments are net after a 21% average reduction of fines, penalties, and interest.
Mariana Lellis is the chief negotiator for the PGFN. She says that the settlements are a result of the government trying to reduce litigation risks while increasing revenue inflows.
Negotiations are driven by an integrated settlement program
Most recent agreements were made under Brazil’s Integral Settlement Program, a program designed to encourage businesses to resolve complex tax disputes outside of the courtroom.
Despite the fact that the deadline for submissions ended in December of last year, hundreds of proposals continue to be reviewed.
According to PGFN about 70 petitions for settlement from business are still under consideration, meaning that the amount collected could increase in the upcoming month.
The scheme offered discounts between 10% and 30% depending on whether the debt could be recovered, how long the litigation would take, and if the government had a good chance of winning the case.
Lellis said, in reference to the cases still awaiting assessment, that “there is a larger universe of institutions, and a larger stock of credit.”
She stated that the majority of tax problems in Brazil involving high value are a result of financial issues.
CPMF and Legacy Taxes
A significant part of recent settlements was attributed to disputes relating to the now defunct CPMF. This tax on financial transactions, which had been abolished by the government in 2007, but that continued to be litigated for many years, accounted to a large portion.
Santander Brasil, according to PGFN, paid approximately 1 billion reais, after discounts, to settle CPMF claims, while Citi settled similar cases for around 400 millions reais.
These issues remained unresolved due to their complexity and different interpretations regarding the tax.
Both sides avoid the possibility of court decisions that are unfavourable and delays by reaching a settlement.
Itau focused its negotiations on the taxation of financial incomes under PIS and Cofins.
PGFN chose to settle through negotiation rather than go to court due to the uncertainty of how the decision would be applied, despite Brazil’s Supreme Court’s ultimate victory in the main issue.
Itau also agreed to cover income tax liabilities and CSLL obligations, totaling about 1 billion reais.
The Daily Hodl published the following article: Brazil banks settle tax claims for around $450M
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