The plenary of the Federal Supreme Court (STF) dismissed the Direct Action of Unconstitutionality 4,273 (ADI 4,273). The ADI was presented by the Attorney General's Office (PGR) and challenged the constitutionality of articles 67, 68

These articles limit the power of the State to punish in case of payment of the tax debt. Thus, when the debt is paid in full, criminal liability is extinguished.

In the case of entering a tax debt installment program, the punitive claim of the State on tax crimes will be suspended during the payment of the installments. When all installments are paid, the criminal liability will be extinguished due to the full payment of the tax debt.

The Supreme Court sustained the decriminalizing measures on the grounds that the criminal sanction is the last resort to be used by the State. With the collection of due taxes, either by payment at once or in installments, the tax objective is achieved. Thus, it makes no sense to maintain such a severe measure as the imposition of a criminal penalty.

ADI 4,273 was presented in 2009 by the PGR, which claimed that these articles would be contrary to the State's duty to promote a fair society because they would impair the ability of the tax authorities to collect taxes.

The main argument the PGR makes is that the criminal protection given to the tax order and the threat of punishment are the main means of incentive for the payment of taxes. From this reasoning, it is inferred that the limitation of the threat of penalty, guaranteed by the challenged articles, would violate the fundamental rights to a fair, egalitarian, and free society provided for in articles 3 and 5 caput of the Federal Constitution.

According to the vote of the reporting justice, Kassio Nunes Marques, who was accompanied by all the other ministers, the challenged articles are not incompatible with the constitutional text.

The main points of his vote were:

  • the tradition of the Brazilian criminal legislature of prioritizing the payment of the due tax and the reparation of the damage caused to the detriment of the criminal punishment of the taxpayer;
  • the suspension of the punitive claim during the installment payment of the tax debt be recognized in other legal texts;
  • the existence of several laws in Brazilian law that provide for the extinction of criminal the liability after the payment of the due taxes;
  • the fact that tax crimes are not sufficiently offensive for the privileged application of the criminal law and, therefore, to require punishment even after reparation for the damage caused;
  • Criminal law is the last resort (ultima ratio) as a means of protecting any legal asset, in this case the protection of the treasury. That is, criminal law is only necessary when the other norms do not achieve the objective sought by the law;
  • the suspension of the punitive claim of the State and the extinction of the liability due to the payment of the tax debt fulfill the function of guaranteeing the collection, making unnecessary application of the criminal law. As such that, if the installment payment is not complied with, the punitive claim will be resumed; and
  • The suspension of criminal punishment during installments, in addition to promoting tax collection, contributes to the promotion of economic activity and, consequently, the generation of jobs. Thus, contrary to what the PGR defends, the suspension and extinction of liability and the emphasis of the legislator on the reparation of damage to public property contribute to the fulfillment of the fundamental objectives expressed in Article 3 of the Federal Constitution.

This decision is extremely relevant for taxpayers, especially for business leaders who face an uphill battle with the tax authorities to comply with all the rules of collection in a complex tax system in which the courts themselves present divergent interpretations.

This is because, as legal entities cannot be held criminally responsible for tax crimes, the criminal exposure falls on their representatives and/or executives.

The confirmation of the constitutionality of the two decriminalizing measures – payment and installment of the due tax – makes it possible to close criminal proceedings initiated against individuals due to the alleged tax default of the legal entity.

 

[1] Art. 67.  In the event of installment of the tax credit before the offer of the complaint, this can only be accepted in the event of default of the obligation object of the complaint.

Art. 68.  The punitive claim of the State, referring to the crimes provided for in the articles, is suspended. 1st and 2nd of Law No. 8,137, of December 27, 1990, and in the arts. 168-A and 337-A of Decree-Law No. 2,848, of December 7, 1940 – Penal Code, limited to suspension to debts that have been the subject of installment concession, until the installments referred to in the articles are rescinded. 1st to 3rd of this Law, subject to the provisions of Article 69 of this Law.

Single paragraph. The criminal statute of limitations does not run during the period of suspension of the punitive claim.

Art. 69. The punishability of the crimes referred to in article 68 is extinguished when the legal entity related to the agent makes full payment of debts arising from taxes and social contributions, including accessories, which have been the subject of installment payments.

Single paragraph. In the event of payment made by the natural person provided for in § 15 of article 1 of this Law, the extinction of punishability will occur with the full payment of the amounts corresponding to the criminal action.

[2] Art. 9 The punitive claim of the State is suspended, referring to the crimes provided for in the articles. 1st and 2nd of Law No. 8,137, of December 27, 1990, and in the arts. 168A and 337A of Decree-Law No. 2,848, of December 7, 1940 – Penal Code, during the period in which the legal entity related to the agent of the aforementioned crimes is included in the installment payment regime.

  • 1 the criminal prescription does not run during the period of suspension of the punitive claim.
  • 2 Extinguishes the punishability of the crimes referred to in this article when the legal entity related to the agent make full payment of debts arising from taxes and social contributions, including accessories.