The tax issues, for which nonbinding rulings have already been issued, involve the enlargement of the P.I.S. (Program for Social Integration contribution) and COFINS (Contribution for the Financing of Social Security) tax basis, which the court ruled unconstitutional in November 2005; the 1999 increase in the COFINS rate (from 2 percent to 3 percent), which the court ruled constitutional; and the timing of tax crime prosecutions. According to the Supreme Court, a taxpayer can be prosecuted for a tax crime only after the civil administrative tax case is concluded.
Under Law No. 11,417/06 of December 20, 2006, to make the court’s rulings in those matters binding, the vote must be 8 to 2, or more than two-thirds in favor. In the court’s 2005 ruling on the enlargement of the P.I.S. and COFINS tax basis enlargement, the vote was 6 to 4. Therefore, for the ruling to become (retroactively) binding, two justices who voted for the constitutionality of the enlargement will have to change their position. Otherwise taxpayers still will have to file lawsuits to recover excess P.I.S. and COFINS payments.
Supreme Court sources say a vote on the proposed binding rules is expected by the end of April.
David Roberto R. Soares da Silva
(Originally published on the Feb 12 edition of World Tax Daily (copyrights Tax Analysts – www.taxanalysts.com)