A case which may change the way social security tax is calculated in Brazil has been delayed yet again, with the Supreme Court yesterday granting a motion brought by President Lula to suspend the case.
The vote to grant the constitutionality motion means the government gets to keep the goods and services tax (ICMF) included in the collection of social contributions (Cofins) for at least another six months, while the court debates the constitutionality of removing the tax from Cofins within that deadline.
The case was brought in 1999 by Auto Americano. The car parts company argues that under Brazilian law, Cofins contributions are revenue-based and, as ICMF is not part of a company’s revenue, it should be excluded from the Cofins tax base.
If Auto Americana wins, ICMF could be excluded from all Cofins calculations.
Partner Cristiane Romano of Machado Meyer Sendacz e Opice has been representing Auto Americano since the case began. She says while the suspension does not greatly affect the facts of the law suit, a decision is overdue: “This deadline means that the final decision has to be taken within 180 days, but I hope they solve the case before then because this has been discussed for nine years.”
Romano thinks there is a good chance the Court will rule in favour of her client, as 6 out of 11 justices have already voted in favour of removing the tax.
Brazil’s attorney general, who praised yesterday’s passing of the motion, pointed out that the government could stand to lose an annual 12 billion reais (US$7.4 billion) in revenue if the court ruled to exclude the tax.
The case was also delayed last May, following a constitutionality motion by one of the Supreme Court judges who wanted to examine the regulations in more detail. Romano explained at the time that it while it was not unusual to examine cases further, it is thought by many that the government was lobbying for its interests by persuading the Supreme Court to suspend the case (read more here).
The Court voted nine to two in favour of passing the motion. President of the Court, Gilmar Mendes, said in a statement that once the Court rules on whether or not excluding ICMF from Cofins is constitutional, the decision will be binding.
Counsel to Auto Americano
• Machado, Meyer, Sendacz e Opice Advogados.
Partner Cristiane Romano
(Latin Lawyer 14.08.2008)