Brazil: Citizen Suits Filed Against CARF’S Decisions

The press has recently reported1 that decisions favorable to taxpayers, rendered in tax administrative proceedings by the Administrative Council of Tax Appeals (CARF), have been challenged before the Judiciary through Citizen Suits filed based on Law no. 4,717/65.

These actions claim, in general, that the cancellation of tax assessments by the CARF were illegal and mistaken, which seriously damaged the public coffers and property, as well as offended the administrative ethics, for which reason they seek that the taxpayers be ordered to reimburse the Federal Government.

We believe that the grounds of these actions are not very consistent, since they are based on the thesis that the interpretation made by the Plaintiff of the Citizen Suits as to the tax rules on which the assessments canceled by the CARF are based must prevail over the one that was legitimately rendered by the representatives of the Federal Tax Administration, in the performance of the duty and power granted on them.

The doctrine considers unacceptable the maneuver of a Citizen Suit that "objects to the validity of an act practiced by a proper agent, in accordance with the law and the regulations approved by the legitimate Constitutional Powers, only based on the vague concept of immorality", because "if the administration acts under the law, without deviation of purpose, it is not possible to accept the intervention of the Judiciary through a citizen suit"2.

Despite the above, generally speaking, we believe that such actions can mean a serious legal uncertainty in the relationship between the tax authorities and taxpayers, in case the Judiciary agrees to prosecute these claims3, as well as a clear risk of financial losses to companies in the event the action is held to be valid. The situation is even more worrying due to the fact that companies may be obliged to maintain provisions, for years, of sums that the Federal Government (creditor) itself has already recognized are not due.

The Superior Court of Justice (STJ) has already ruled, in a similar case, that the decisions of the former Taxpayers' Council are definitive, once the administrative proceeding has been completed4. Furthermore, the same Court was clear when affirming that disrespecting CARF's definitive decisions takes away the credibility and usefulness of the council, therefore these attitudes are to be rejected5.

Moreover, we consider that such citizen suits, in progress in the Judiciary, do not represent the interest of the collectivity, but private interests, albeit named as 'homogenous' individual interests, which have also been repealed by the STJ6. This is because there is no effective demonstration that serious damage was caused to the public coffers and property.

After all, there doesn't seem to be any seriousness or even damage in the cancellation of tax assessments through the procedure provided for in the legal rules of the Brazilian Legal System, which govern tax administrative proceedings of the Federal Government.

As known, the Administration is entitled to self-protection, verifying the validity, legality, and legitimacy of its own acts. Hence the validity of CARF's activity, which decides on the correction of the tax administrative proceedings that led to the notices requiring the payment of taxes, interests, and fines. Therefore, it seems to us that the possibility of the tax administration performing such a self-protection activity, within the limits of legality, is more interesting for the collectivity, ensuring the taxpayers' legal and tax certainty, than removing this right, wiping out the operation of a entity with almost 88 years of activity, mainly because such Citizen Suits do not indicate any fraud or crime.

In this line of thought, the first favorable decision to the taxpayers was rendered (in one of the 59 actions filed recently), in which the Judge dismissed the proceeding without judgment on the merits, as the plaintiff lacked standing to sue, in cases in which there is no definitive decision yet from the mentioned administrative body (in the decided case, appeals in the administrative proceeding are still pending decision).

The judge stated that: "the citizen suit did not mention any act that is harmful to the public property claimed to be practiced by the councilors (...), and was limited to stating that they had judged the matter incorrectly. It was the lawmaker's choice to create tax administrative proceedings, so that the Administrative itself would carry out an internal control of the legality of the tax assessments, creating for such a number of judgment bodies (...). And in the system created, provided there is a tax administrative decision, the tax credit is then ended, since the Administration itself will have concluded the original assessment lacked grounds"7.

Lastly, we inform you that our Firm has already been working with such proceedings, for which reason we are available to assist you in this matter and in any further questions you may have.


1 Valor Econômico of Feb. 8, 2013, and Consultor Jurídico's (CONJUR) homepage of Feb. 6, 2013, de ( , consulted on Fe. 8, 2013)

2 Hely Lopes Meirelles, citing Castro Aguiar. In Mandado de Segurança, Ação Popular, Ação Civil Pública, Mandado de Injunção, Habeas Data. Malheiros, 21ª Edição, Atualizada por Arnoldo Wald, SP, pp. 120/121.

3 We know of a similar action in progress with the TRF of the 3rd Region, in which the judge ruled out all the preliminary arguments presented by the Defendants, which claimed the citizen suit had no grounds to challenge the cancellation of tax assessments by the Council, but agreed with the merits of the administrative decision, ruling against the pleading of the citizen suit (Proceeding n. 0004796-31.2003.4.03.6104).


1. Pursuant to the principle of legal certainty, the administered party cannot be at the mercy of a posterior review of a definitive decision in an administrative proceeding that was rendered regularly.

2. Special appeal dismissed. (REsp 572358/CE, Reporting Justice JOÃO OTÁVIO DE NORONHA, SECOND PANEL, judged on 10/10/2006, DJ 12/106/2006, p. 239)

5 Writ of Mandamus n. 8.810/DF, Reporting Justice HUMBERTO GOMES DE BARROS, FIRST SECTION, judged on 08/13/2003, DJ 10/06/2003, p. 197.

6 "This is because the purpose of the citizen suit is not the defense of private interests or even individual property interests, albeit homogeneous". (REsp 776.857/RJ, Reporting Justice LUIZ FUX, FIRST PANEL, judged on 12/16/2008, DJe 02/18/2009)

7 Proceeding n. 60.948-05.2012.4.01.3400

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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