Congress steps forward and asks Moraes to maintain the repeal of the IOF decree

The National Congress moved ahead of the session scheduled by Supreme Court Justice Alexandre de Moraes to address the IOF. On Friday (11), it sent a request to the Supreme Court requesting that the Executive decree that increased the tax be upheld.

Signed by lawyers from the Chamber of Deputies and the Federal Senate, the document requests a declaration of constitutionality of the measure taken by Congress that invalidated the government's decrees on June 25.

The Houses of Parliament argue that it is their prerogative to legislate and oversee the Executive Branch. "The system of checks and balances presupposes that the Legislative Branch has the duty to curb any excesses of the Executive Branch and oversee its actions, exercising external oversight of the Public Administration," they state.

The lawyers still argue that, for the changes desired by the government to be valid, they should have been made through a supplementary law, which created a new taxable event, and an ordinary law, which instituted the tax and defined its rates.

Legislature challenges the revenue use of the IOF increase

Regarding the IOF, the argument is that the Executive Branch could change the tax rates or calculation bases to align them with monetary policy objectives. "The IOF increase exceeded this limit, affecting all tax bases (insurance, foreign exchange, credit, securities), with a clearly revenue-raising intent," Congress states.

"Note that the fiscal motivation in the issuing of the presidential decrees was clear and widely publicized by federal government authorities in interviews, and reproduced by the press, constituting a public and notorious fact that does not require proof in the judicial sphere," states the request sent to the STF.

The complaint was submitted to the Supreme Court four days before Moraes's scheduled conciliation hearing between the legislative and executive branches on the matter. On July 4, the Supreme Court justice suspended both the presidential decree that increased the IOF (Tax on Financial Transactions) and the legislative decree that overturned the increase.

"There being strong arguments that indicate the existence of reasonableness in the immediate suspension of the effectiveness of the contested decrees, including because of this undesirable clash between the measures of the Executive and Legislative branches, with successive and repeated antagonistic statements, [...] I grant the precautionary measure to suspend the effects of the presidential decrees [that would increase the IOF rates] as well as the Legislative Decree [that overturned the government's act]", wrote Moraes in the decision.

According to the minister, both decrees may have deviated from the Constitution: by the Executive, by raising a regulatory tax for revenue purposes; and by Congress, by taking action against a prerogative of the Executive Branch.

Lula insists on decree to increase IOF and threatens to cut amendments

On Thursday (10), President Luiz Inácio Lula da Silva (PT) once again defended the decree that raised the IOF and said he will maintain the increase, stating that, if the overturn by Congress is not reversed, parliamentarians will have to bear the cost of cuts in parliamentary amendments.

"The representatives know that if I have to cut R$10 billion, I'll cut from their amendments too. They know that. It's important that we reach an agreement. I'll keep the IOF (Tax on Financial Transactions) (IOF). If there's an item in the IOF that's wrong, we'll remove that item. But the IOF will remain. The representatives can issue a decree if they've made a constitutional error, which I haven't," he said.

The conciliation hearing is scheduled for next Tuesday (15). The expectation is that the president of the Chamber, deputy Hugo Motta (Republicanos-PB), of the Senate, Davi Alcolumbre (União-AP), the Attorney General of the Union, Jorge Messias, as well as representatives of the Attorney General's Office and the Executive will be present.