1 The long-awaited amnesty - Dorr Consulting
August 26, 2015 Fernando Muniz

The long-awaited amnesty

Amnesty for whom? That’s an interesting question. We waited a while to finally make our comment on the matter and thus we could see how some legal consultants are seeing the project to implement the RERCT (A special regime to come into tax and currency exchange compliance) to be regulated by the PLS 298/15 or to simplify, a project for capital repatriation. Our vision always has been accompanied by a certain skepticism about the government’s ability to pass such a project with so little political capital as now, but let’s leave that aside for a moment.

The project itself is bound to create a fund for loss compensation with ICMS due to the attempt to finally promote a reform of such a tax to end the fiscal war between the states. Unfortunately as is common in Brazil is an inconsistency to expect a fund that require recurring funding to be powered via a measure that will promote a non-recurring revenue, famous cover the sun with a sieve. But this is not a project design error itself, but the fiscal measures plan.

Speaking only of amnesty, we have several international experiences with different outcomes for the study, which should be used to at least once learn from the mistakes of others. Thus we refer to the article published by lawyers Rodrigo Chacon and Eduarda Roses from Roses Bar Association as follows:

At first, the lawfulness of the money would be conditioning the forgiveness of unlawful behavior – tax evasion and capital flight – because it would make sense to forgive the tax shortage and prosecute the taxpayer for the related offense.

The problem is that would be forgiven by this measure only the crime of foreign exchange evasion, disregarding the fact that evasion usually involves money laundering acts or fraud crimes, for example, those to hide the existence of assets or unlawful conduct which gave rise to them. That way the efficiency and effectiveness of the law would depend on the tax forgiveness coupled with broad and unrestricted criminal forgiveness: what gave rise to the money and what was done to subvert it later.

In its current configuration, therefore, the proposed legislation decriminalizes related crime only if it is tax evasion, institutionalizing that there are less illegal illicit activity for amnesty purposes and defying Vespasian’s maxim to which pecunia non olet. The government lack the boldness to extend the goodness beyond political correctness.

The need for a “legal origin” of heritage places in the same boat the drug trafficker, irresponsible businessman, corrupt public officials and scared savers who are looking to escape the permanent political risk, economic plans, the specter of currency exchange, confiscation and inflation. Added to this the current political and economic instability experienced in the country, apart from the constant devaluation of the Real. Not to mention, of course, the national tax burden standing at the podium as the highest in Latin America.

Following the same rational:

Moreover, if they are considered false claims of the taxpayer – those included the statement that all its assets abroad are covered in the declaration – in addition to the 35% tax and fine, will address the civil, administrative and criminal penalties. Suspend the benefits provided for in PLS 298/2015. Unforgotten. Unforgiven.

How this analysis will be carried out or what transparency and accessibility will develop its process? What is the degree of subjectivity involved? The prospects are not encouraging.

In short, the way provided there is no certainty that the taxpayer will be free of complications depending on the “understanding” of authority.

Furthermore it is necessary to pay special attention to the following passage:

And more: in addition to tax 35% and completeness of statement is expected, absurdly, in Paragraph 1 of Article 8 of the project that, somehow, if the funds repatriated signify impact on the economic system, can be determined by the Central Bank a mandatory deposit, with a deposit yield determined by the National Treasury. This means a freeze of those amounts already abusively taxed and which will now be impounded at the owner.

Obvious conclusion:

If the intention was to completely compromise the taxpayer, the most coherent would be to provide a safe environment in which he felt supported, otherwise it will be counter-intuitive. From the time it is placed such likelihood off facing a criminal prosecution – unfairly – as a result of joining the amnesty, the bill is in check.

As it stands, the proposal has more trap than amnesty for Brazilian wishing to regularize his belongings to the tax authorities. Frustrating to anyone expecting a viable exit. Punished whom joins the RERCT.

Back to the initial question: what is amnesty?

For those interested to read the full article (Portuguese) click here

To go a little deeper, the articles (Portuguese) of Ives Gandra da Silva Martis available here and of Everardo Maciel in this link.

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