STF decided by judgment on May 13 to withdraw PIS / Cofins from the ICMS calculation base with retroactive effect from 2017. | Photo: Marcello Casal Jr / Agência Brasil
The decision of the Federal Supreme Court (STF) to remove the ICMS from the basis of calculation of the PIS and Cofins generated around 358.1 billion reais in tax credits for companies, according to an estimate by the Institute Brazilian Planning and Taxation (BIPT). Of this total, around BRL 93.4 billion, or 26.08%, has already been cleared between 2017 and 2020. An additional BRL 56 billion is expected to be paid by the Union this year, and around BRL 69.6 billion in 2022.
In the years 2023 and 2024, the credit netting is expected to be R $ 47.8 billion and R $ 44.1 billion, respectively. From 2025, it is estimated that the credit clearing will be R $ 47.09 billion.
The values result from the judgment known as the “thesis of the century”, in which the Supreme Court ruled that the ICMS should not be part of the application formula of the PIS and the Cofins, as it is was understood until then. Due to the damage to public funds that the new agreement could cause, the STF modulated the decision, creating two different situations for those who seek compensation for the unduly paid tax.
The taxpayer who has filed a legal action or administrative procedure requesting the declaration before March 15, 2017 – the date of the STF’s first decision in favor of this agreement – will be entitled to compensation for the amount overpaid during the five previous years. . Anyone who filed a complaint later will only be able to recover from that date.
According to BIPT’s calculations, if the STF decided not to modulate the effects of the decision, the economic impact of excluding ICMS from PIS and Cofins could be 587 billion reais, i.e. close to 230 billion reais more.
A technical note from the Independent Fiscal Institution (IFI), a body linked to the Senate, estimated between BRL 829.6 billion and up to BRL 1.24 trillion the total that the Union will not collect with the application of the “thesis of the century” decision considering the period from 2017 to 2030. The values would correspond to something between 0.6% and 0.9% of the country’s GDP over the period.
The modulation was fair for the Union and taxpayers, according to a tax expert
To arrive at the projections, BIPT based itself on data from the Tax Administration itself referring to the collection of tax, tax notices for non-compliance with the STF decision from 2017 and the amount already compensated. Information on prosecutions that have already become final and on the estimate of compensation by branch of economic activity were also used, explains the President of the Board of Governors of BIPT, Gilberto Luiz do Amaral.
According to a response from the tax administration to a taxpayer via the law on access to information, it is estimated that the ICMS represented 9.57% of the collection of PIS and Cofins, excluding financial institutions, which corresponds to 1% of the total contributions collected. The study also took into account the fact that taxpayers managed to recover 52.25% of the amounts claimed between 2003 and March 15, 2017.
For Amaral, modulation was a fair measure adopted by the STF. “It was a Solomon Islands decision in the sense that it considered the interests of taxpayers and of the Union,” he assesses. “If the decision had a significant impact on a given fiscal year, there would be a side effect for public policies, which are awaiting recovery,” he explains.
According to BIPT, even with the change in the PIS and Cofins calculation formula from 2017, no negative economic impact was observed in the recovery of these contributions. The share of taxes in federal revenues has remained around 21% over the years, according to the survey.
However, the return of values is not automatic. According to the Supreme Court decision, undue payments made from March 15, 2017 can be subject to administrative compensation, without the need to initiate legal proceedings.
For this, the Internal Revenue Service has yet to issue a normative instruction regulating the procedure. In addition, the General Prosecutor’s Office of the National Treasury will have to review the active debt registrations based on this issue.