Mendonça backs down, gives victory to Haddad and paves the way for the government to collect R$90 billion in taxes.
The minister partially granted a request for reconsideration made by the National Treasury.
(Reuters)- Supreme Court Justice André Mendonça overturned his own decision that had suspended the effectiveness of an important Superior Court of Justice (STJ) ruling on tax benefits which, according to the economic team, have the potential to bring an additional 88 billion reais per year to federal coffers.
Mendonça partially granted a request for reconsideration made by the National Treasury, according to which the objective of the STJ (Superior Court of Justice) ruling and the other process that served as the basis for the STF (Supreme Federal Court) decision are of distinct natures.
"I understand prima facie that the argument of relative legal uncertainty generated by differing interpretations of the STF and the STJ regarding the effects of the exercise of tax exemption powers by a federated entity, to the detriment of the tax base of another federative unit, is plausible," he stated in the decision.
According to the STJ's decision, unanimously taken on April 26, it was established that the federal government could collect Corporate Income Tax (IRPJ) and Social Contribution on Net Profit (CSLL) on tax benefits granted by states, provided that they were not classified as presumed credit and that they met legal requirements.
Mendonça, however, in a preliminary ruling given during a trial at the Superior Court of Justice (STJ), argued that there was another ongoing case on the subject at the Supreme Court and that, therefore, the discussion was not "definitively settled."
The following day, however, two experienced sources at the Supreme Court had already told Reuters that the court's plenary session was likely to invalidate Mendonça's measure, guaranteeing a victory for the government. Now, since the minister himself has backed down, the Supreme Court will no longer need to analyze the injunction.
Arguing that the new fiscal framework will only be sustainable if the government's tax base is replenished, Finance Minister Fernando Haddad announced measures this month to generate gains exceeding 100 billion reais per year.
The package included the end of the $50 exemption for international orders, a measure that was ultimately discarded after public pressure, the taxation of online betting, which has not yet been published, and new revenue expected from the STJ's decision, which accounts for the largest fiscal impact.
Haddad's team has stated that any setbacks with measures already presented will lead the government to announce new rounds of fiscal adjustment proposals.