Grace Perez-Navarro complained in writing to Fernando Haddad, Brazil's finance minister, about judicial injustices and lengthy tax appeals.
According to a letter sent on March 31 to the country's finance minister, the former director of the OECD's Centre for Tax Policy and Administration expressed some serious concerns about how the Brazilian tax administration was operating.
Grace Perez-Navarro wrote Fernando Haddad a letter on her last day in office claiming that Brazil's Administrative Court of Tax Appeals (CARF) creates a "unintended incentive against voluntary tax compliance".
The letter, contended that Brazil's tax structure offers taxpayers an unfair edge in CARF disputes, leading to an unjustifiably high number of cases making it all the way to the judicial appeals process.
The issues surround CARF, which consists of eight judges, four of them are from the private sector and the other four from Brazil's Federal Revenue. This split frequently ends in a tie.
In Brazil, ties are more frequent when a "high tax amount is at stake," according to the letter.
Due to legislative changes enacted in 2020 that resulted in tax payments and penalties being canceled, the taxpayer will always win a tie-breaking vote.
Previously, the CARF president would get significant weight in the event of a tie. Congress is debating a provisional measure that would reinstate the prior system.
Decisions made by CARF may be challenged under the current framework, but only if the taxpayer is harmed. According to Perez-Navarro, a decision that is tied and indicates that it "deserves to be further clarified or resolved through an independent judicial process" cannot be appealed.
Perez-Navarro's letter claims that after an appeal is filed, the process often lasts seven years and may be followed by an 11-year federal judicial review.
"This may extend the litigation to a point where the matters become barred by the statute of limitations, which can make any subsequent enforcement or correction of the initial assessment impossible," she wrote.
Because there are no down payments or tax guarantees required during the appeals period, Brazil's system is a legitimate way for businesses to save money.
The letter noted that even if a payment is eventually made, the value will have decreased, which will result in less tax being paid.
Perez-Navarro emphasized the size of the affected tax issues as being considerable. Every year, the number of tax liability issues litigated in CARF amounts to about 12% of Brazil's yearly GDP and nearly 25% of the country's public debt.
The Perez-Navarros suggested a return to the pre-2020 voting mechanism while stating that the OECD will keep collecting data on the Brazilian tax appeals procedure.
Perez-Navarro was a member of ITR's Global Tax 50 for 2022, however Manal Corwin has since taken his position.
By fLEXI tEAM