By Mariana Martins

Much has been said in recent weeks about the provisions contained in Bill 529/2020, presented by the State Governor, João Dória, to the Legislative Assembly of the State of São Paulo on the 12th.

The aforementioned PL consists of a set of measures to reduce costs and rebalance public accounts due to the alleged drop in revenue and increase in health spending in the fight against the Covid-19 pandemic, which includes the extinction of some decentralized entities in the health and transport areas, for example, the reduction and/or revocation of some ICMS tax incentives, some relevant changes in the ITCMD and IPVA legislation, among others.

The most relevant and expected by taxpayers in São Paulo, without a doubt, is the possibility of entering into tax settlement agreements to reduce litigation and to settle debts registered as active debt by the Attorney General's Office of the State of São Paulo, whether or not they have been brought to court, which today total, according to the official letter from the Secretariat of Projects, Budget and Management attached to the PL, R$ 104 billion classified as unrecoverable and R$ 185 billion classified as difficult to recover, and in this last scenario only 10% of the amounts discussed in court are guaranteed.

The provisions of Bill 529/2020 are nothing more than the reproduction, not always with the same words, of Law No. 13,988/2020, which regulates the institute of the transaction at the federal level. In addition to the possible formalization through adhesion or the offering of an individual proposal, the São Paulo transaction also reproduces the federal command, especially with regard to (i) the benefits included (reduction of fines and interest related to irrecoverable or difficult to recover debts, installment payments, moratorium and possibility of replacing guarantees, (ii) the deadlines for installment payments (not exceeding 84 installments, this limit being applicable to insolvent taxpayers or those undergoing judicial/extrajudicial recovery, and 60 installments for other companies) and the prohibitions on the use of the institute, with some specific peculiarities related to the dynamics of state taxes, such as ICMS.

In addition to the usual prohibitions, also applicable to federal tax transactions, PL 529/2020 restricts the use of the transaction agreement (i) to ICMS debtors who, in the last 5 years, have defaulted on 50% or more of their due obligations, thus requiring some degree of tax compliance to use the benefit, (ii) to debts incurred while enjoying tax benefits, which may only be paid off without reducing fines and interest, regardless of whether payment is made in cash or in installments, (iii) to the settlement of debts of the State Fund for Combating and Eradicating Poverty (FECOEP), which cannot be the subject of an agreement, and (iv) to debts that are being discussed through an action for recovery of undue payment, when not consolidated with debts of other natures and/or discussed through other legal measures.

The Bill, whose processing was requested as urgent, if approved, will still need to be regulated by the Attorney General's Office of the State of São Paulo, which will define the parameters and procedures for formalizing transaction agreements by adhesion or by individual initiative of the debtor or the State itself.

It is expected – although it does not seem to us to be the way forward – that the State of São Paulo adopts a vanguard position and builds, together with its respective Attorney General's Office, a fairer and more equitable system of agreements, with an increase in the possibilities of presenting individual proposals, valuing the element of mutuality between the parties as provided for in art. 171 of the CTN and in art. 840 of the Civil Code of 2002 and the creation of an environment truly capable of encouraging taxpayers' tax compliance, especially because the State of São Paulo has not adopted any measures that could facilitate in some way the compliance of companies that had their revenue reduced in the most critical months of the pandemic, and this is the time to encourage the rebalancing of public accounts through an effective policy of tax relief and waiver.

It is possible that during its processing the Bill will undergo several amendments, which should not occur with the provisions related to the transaction, given its guiding nature of the institute and its similarity to the Federal Law. It will be up to the State Attorney's Office, once again, to make good use of its regulatory power to translate the aforementioned objectives.