Superior Court of Justice (STJ) dismisses lawsuits against business owners who failed to pay declared ICMS (Value Added Tax).

Business owners have been able to have criminal proceedings against them dismissed by the Superior Court of Justice (STJ) for failure to pay declared ICMS (a Brazilian sales tax). The justices have changed their understanding and have begun to take into account the criteria established by the Supreme Federal Court (STF) in December for criminalizing the practice — frequency (habitual delinquency) and intent to avoid paying the tax even when having the financial means (intent to misappropriate).

Until the Supreme Court's decision, the understanding of the Superior Court of Justice (STJ), consolidated by the 3rd Section since August 2018 (HC 399109), was that any non-payment of ICMS (a Brazilian state tax) should be considered a crime. Now, even the rapporteur of the case judged by the Section, Minister Rogério Schietti Cruz, who was once a staunch defender of broad criminalization, judges differently.

In early August, he and the other ministers of the 6th Panel decided to dismiss the criminal proceedings against the managing partner of Sasil Comercial e Industrial de Petroquímicos, Paulo Sérgio Costa Pinto Cavalcanti (Agrg in HC 97903). The businessman was indicted by the Public Prosecutor's Office of Santa Catarina for the fact that Sasil failed to collect R$ 36,000 in ICMS (a state sales tax) in one month. The amount was divided into 60 installments, but after some payments, there was a default.

Rogério Schietti Cruz understood that for the crime to be established, the conduct must be intentional. According to the minister, "there is an unquestionable difference between someone who does not pay taxes due to circumstances beyond their control (financial difficulties, errors in filling out forms, etc.) and someone who intentionally fails to pay taxes motivated by personal interests (possibility of reinvestment with a higher return, obtaining greater profits, etc.)."

According to the lawyer who worked on the case, Paula Lima, a partner at Caputo, Bastos e Serra Advogados, although the Supreme Court's decision has been heavily criticized, by establishing criteria it has allowed taxpayers to have criminal proceedings halted. "In our case, our client only owed one month's debt; it wouldn't be possible to say there was contumacy," she says.

Many charges brought by the Public Prosecutor's Office, the lawyer states, are filed without a prior investigation of the cases. "The problem is that the criminal process tarnishes the businessman's image. It's a long process until it's proven that no crime was committed," she says.

The Superior Court of Justice's decision correctly applies what was established by the Supreme Court, according to tax lawyer Gabriel Abujamra Nascimento, a partner at Mattos Engelberg Echenique Advogados, who also worked on the case. He believes that criminal proceedings "should punish those who are actually tax evaders and not coerce business owners in financial difficulty into paying taxes."

The fact of facing criminal charges, he adds, undermines the businessman's credibility with suppliers and customers and worsens the financial difficulties of the company. "If not used correctly, criminalization will be a way to bankrupt the company."

Another businesswoman, responsible for a furniture factory in Santa Catarina, also managed to have a criminal case dismissed in the 6th Panel of the Superior Court of Justice (REsp 1852129). She was accused by the Public Prosecutor's Office of owing four months of ICMS (a state sales tax), totaling R$ 67,000.

In his vote, the rapporteur, Minister Sebastião Reis Junior, emphasizes that "the failure to collect the declared ICMS constituted an isolated event in the management of the legal entity, as it lasted for a short period of time (four months), with no mention of any administrative tax process initiated to investigate subsequent appropriation after this period."

Attorney Igor Mauler Santiago, from Mauler Advogados, who advised a client in the Supreme Court's plenary session, states that the understanding improved the scenario previously outlined by the Superior Court of Justice (STJ). "The Supreme Court somewhat mitigated the devastating impact of the STJ's decision. The situation was tragic, now it's bad."

According to him, the Supreme Federal Court (STF) established two important conditions for criminalization, despite not having a defined concept of habitual behavior and intent to misappropriate. He adds that if these issues are not addressed in the publication of the judgment or in motions for clarification, "it will be up to jurisprudence, over the years, to define them."

There are also monocratic decisions from the STJ. One of the cases was analyzed by Minister Reynaldo Soares da Fonseca. He ordered the second instance to re-analyze the case of a taxpayer who owes 13 months of ICMS (a state sales tax), but who alleges financial difficulty, which, according to the minister, was not evaluated (REsp 1851000).

In June, at the Supreme Federal Court (STF), Justice Cármen Lúcia also dismissed a criminal case against a taxpayer who declared ICMS (a Brazilian sales tax) but did not pay it to the State of Santa Catarina for six months—between June and December 2013. According to the Justice, the non-payment did not constitute habitual non-payment or intent to defraud (RHC 165334).

In São Paulo, lawyers highlight first-instance precedents. Judge Saulo Mega Soares e Silva, of the 1st Judicial Court of Agudos, acquitted the administrator of a pharmaceutical distributor who owed two installments of ICMS (a state sales tax) totaling R$ 55,000 (case no. 1002135-32.2016.8.26.0058).

The 5th Criminal Court of Guarulhos acquitted the managing partner of a beverage company who failed to pay R$ 296,000 in ICMS (a Brazilian sales tax) in January 2015. According to Judge André Luiz da Silva da Cunha, there was no contumacy (case no. 1001080-96.2017.8.26.0224).

However, some taxpayers have been convicted. Minister Rogério Schietti Cruz, in a single-judge decision, rejected an appeal from a businessman who owes ten months of ICMS (a state sales tax), approximately R$ 155,000, to the State of Santa Catarina. The second instance court had established a sentence of three years and six months of imprisonment plus 11 days of fines, under a semi-open regime.

In the decision, the minister states that a state of necessity may exist, but tax evasion should be the last resort used by the businessman and on a case-by-case basis (REsp 1870469).

According to lawyer Vinicius Jucá Alves, partner at TozziniFreire, the courts are analyzing each case individually to acquit or convict. In favorable precedents, the main motivation has been the short period of non-payment. He believes, however, that the courts should be attentive to acquitting those who failed to pay ICMS (a Brazilian sales tax) due to the crisis generated by the pandemic.

In a statement, the Public Prosecutor's Office of Santa Catarina affirms that "insofar as the understanding of the condition of contumacy is subject to subjective aspects, great care must be taken in its invocation for criminal purposes." In any case, the agency adds, "it is advisable to await the publication of the STF's decision for a more in-depth analysis of the subject." The Public Prosecutor's Office of São Paulo, when contacted, did not respond by the time of publication.

Source: Economic Value