The coming and going of the casting vote

The Administrative Council for Tax Appeals (CARF) is a bench of judges of equal number (pair), under the auspices of the Ministry of Finance, with the attribution of judging appeals at the administrative level. The Council is made up of groups with an equal number of judges, having as members representatives of the Federal Revenue Service and of business and workers’ unions: it is the composition of the antagonism between the tax authorities and taxpayers.

Until 2020, the institute of the quality vote was in force at CARF, establishing that, in the event of a tie between the votes of the judges of the different classes, its President – always a judge representing the National Treasury – would cast the tiebreaking vote, which often revealed a vote pro-tax in case of a tie. (Theoretically, they should cast a technical vote, but history demonstrates that the votes were always in favor of the Union).

This scenario changed with the publication of Law No. 13.988/2020: the casting vote was extinguished and ties would always be decided in favor of the taxpayer, which was even validated by the Federal Supreme Court (STF).

Benefiting from the end of the casting vote, taxpayers came out victorious in cases in which there seemed to be a solid pro-tax understanding, representing an impactful reversal in the understanding of the CARF bench on various topics (i.e., discussions on goodwill, limitation on the use of tax loss, merger of shares, among others).

At the beginning of this year (2023), the Executive Branch published Provisional Measure (MP) nº 1.160/2023 with the objective of reestablishing the CARF’s casting vote, so that the judges representing the Treasury, in their position of presidents of the Chambers, would now be able to cast their votes in deadlock situations.

Since then, several decisions by the CARF have reversed understandings achieved with the end of the casting vote and discussions have arisen about its constitutionality, including the functioning and constitutionality of the CARF itself.

The biggest problem in this situation is the instability and legal uncertainty caused by the comings and goings of the casting vote, mainly because its reestablishment took place through an MP, which produces immediate effects from its edition, which can or not remain dependent on the conversion or not of the MP into law within the constitutional term.

In this sense, a matter may be judged differently by the CARF in a very short period if analyzed during the validity of the MP and based on the effects of the casting vote, or if analyzed without the effects of the casting vote, in the event that the MP is not converted into law and thus ceases to be in force.

In the name of equality and legal certainty for taxpayers, it would be advisable to suspend all CARF judgments until the issue is definitively resolved, as the CARF itself has already determined in relation to some cases.