Last year was special for the Administrative Council of Tax Appeals (Carf). The period began with heated discussions (and many lawsuits) questioning the productivity bonus of tax auditors  and ended with the joining of the representatives of the Brazilian Treasury in the strike for regulation of the bonus.
And 2018 started in an equally troubled manner. The first sessions of the judicial panels and the Superior Chamber of Tax Appeals were marked by extensive and unfulfilled agendas, either due to the cancellation of meetings due to the strike, or due to the impossibility of deciding cases due to lack of time.
Administrative problems aside, the importance of this administrative adjudicatory body is uncontested. With a more and more overwhelmed and time-consuming judiciary, having a quick and technical resolution, and a less burdensome one (without court fees and any order to pay attorneys’ fees), is a boon to taxpayers.
In practice, however, the path through administrative proceedings is not free of its own thorns. There are limitations in the decisions issued by the administrative authorities, which cannot rule on the unconstitutionality of rules. In addition, the resumption of Carf’s activities in 2015, following the outbreak of the Zelotes operation, was felt in the form of a harshening of decisions and an increase in tax victories for the Tax Authorities.
2016’s figures released by the agency  indicate that, in absolute terms, the taxpayer was victorious in 52% of the claims, while the Brazilian Treasury won 48%, an only slightly lower level.  Carf has not yet released the 2017 numbers (the annual report should be published soon), but if one keeps the same methodology for benchmarking, the proportion should not vary by much.
Analysis of this form of calculation, however, requires attention. It takes into account the total number of voluntary and special appeals decided, without considering whether an eventual victory by the taxpayer at the trial level, if modified by the Superior Chamber of Tax Appeals, represents a failure of the claim in the administrative sphere as a whole, that is, the percentage is not based on the final result of the case, but rather on the number of decisions rendered, including those that were modified.
Moreover, when we analyze the percentage of victories in large cases and more complex tax theories involving significant sums, the taxpayer's losses seem more evident. Throughout 2017, the Brazilian Treasury was successful in practically all debates involving the application of transfer pricing legislation in cases of goodwill amortization. The same occurred in the interpretation of Law No. 10,101/00 for the purposes of classifying payments to employees as Profit Sharing (PLR) and in various cases relating to the calculation of the PIS and Cofins calculation basis, just to name a few.
Relevant taxpayer victories were not so numerous. Among the decisions for the year, two cases are worth mentioning that relate to a topic of first impression before the 1st Panel of the CSRF (responsible for reviewing suits relating to IRPJ and CSLL, among others) - the deductibility, for the purposes of IRPJ and CSLL, of expenses with the payment of PLR, when there is an accusation of noncompliance with the requirements of Law No. 10,101/2000, and the consequent misclassification of such amounts as profit sharing. For different reasons, the two cases that dealt with the issue culminated in favorable results for the taxpayer and in cancellation of the tax assessment.
The 2nd Panel of the CSRF (which has jurisdiction to review matters arising from the application of social security contributions, among other issues) ordered cancellation of the tax assessment of companies that granted private pension plans only to part of the employees and managers. It was understood by unanimous vote that Complementary Law No. 109/01 eliminated the requirements of Law No. 8,212/91 (which required the provision of a pension plan to all employees and managers so that there was no application of social security contributions) and thus struck down the interpretation raised in the tax assessment.
Also in 2017, the 3rd Panel of the CSRF (responsible for the decisions involving issues of PIS and Cofins contributions, among others) settled its favorable opinion to the taxpayer with respect to the possibility of appropriating the PIS and Cofins credit on freight paid in the transfer of products between establishments of the same owner.
Even with timid victories for taxpayers, Carf is a reference body in tax matters. Decisions issued by the 15 lower court panels of the body and by the three panels of the Superior Chamber of Tax Appeals, and, more recently, by extraordinary panels, are of undeniable importance for an examination of federal tax legislation.
The court continues to be the scene of important debates involving issues of great factual complexity and high amounts at issue. Considering the possible change in the composition of the adjudicatory panels, it can be assumed that taxpayers may achieve different results in litigation on topics for which they are not successful today. Some terms of office of board members are about to end and there are several vacant positions pending appointment of a board member. Carf has 146 full members, 120 in the lower panels and 26 on CSRF panels. Today, there are eight vacant positions with the lower panels and another four on the CSRF panels.
In 2018, it is expected that effective regulation of the productivity bonus will put an end to the strike that affected the organization, such that all the decisions can be resumed with the prospect of important debates and victories.
1. Initially instituted by Presidential Decree No. 765, of December 29, 2016, converted into Law No. 13,464, of July 10, 2017.
2. CARF Decisions Report - January to December of 2016, published on the website: http://idg.carf.fazenda.gov.br/noticias/2017/carf-divulga-relatorio-das-decisoes-proferidas-de-janeiro-a-dezembro-de-2016
3. Table 1 - Appeals decided by appellant and result of the appeal - published on the website: http://idg.carf.fazenda.gov.br/noticias/2017/relatorio-julgamento-2016-v3.pdf
4. Extraordinary panels are responsible for deciding cases involving up to 60 minimum wages.