Hearing ends without agreement; Moraes must decide on IOF dispute

There was no agreement in the conciliation hearing between the government and Congress, held this Tuesday (15) at the Federal Supreme Court (STF) regarding the impasse of the Tax on Financial Transactions (IOF). The representatives of the parties chose to wait for the judgment on the merits of the case by Minister Alexandre de Moraes. The Executive and Legislative branches were represented only by their lawyers.

The hearing, scheduled by Justice Alexandre de Moraes, aimed to resolve the dispute surrounding the issue, after the Chamber of Deputies and the Senate overturned President Lula's decree on the IOF increase. The Planalto Palace appealed to the courts to try to reverse the defeat and maintain the revenue of approximately R$12 billion for this year.

Rounds of negotiations have been held among members of the Executive branch, with no progress. This Tuesday morning, Finance Minister Fernando Haddad said that expectations for the conciliation hearing were good. After the decision, the minister's office said he would not comment.

Legal representatives from the PL and the Chamber of Deputies, as well as members of the Attorney General's Office, also attended the hearing. The PL and PSOL have filed lawsuits on the matter in court challenging the constitutionality of the executive decree and the legislative decree that overturned the government's measure.

The representatives of the parties simply spoke and presented their arguments. According to the meeting minutes, the Senate's Attorney General, Gabrielle Tatith Pereira, requested more time to continue negotiations, upholding Moraes's preliminary ruling. Alexandre de Moraes asked whether "reciprocal concessions" for negotiations would be possible, but the Attorney General of the Union, Jorge Messias, and the PSOL representative, attorney Raphael Sodré Cittadino, opted to await the court's decision.

Impasse was expected

There was already an expectation that the impasse would continue. The absence of the central figures - the presidents of the Chamber of Deputies, Hugo Motta (Republicans - PB), and of the Senate, Davi Alcolumbre (União Brasil - AP) - already indicated the outcome. The Chief of Staff, Rui Costa, had reaffirmed this Monday (14) that there was no plan B.

On Friday (11), the Legislature sent a request to the Supreme Court requesting that the Executive decree that increased the tax be upheld. The document requests the declaration of constitutionality of the measure taken by Congress that invalidated the government decrees on June 25, under the argument that its prerogative is to legislate and monitor the Executive Branch.

On the other hand, party leaders raised the possibility of a deal involving a reduction in the amount the government intended to raise with the IOF increase. The idea was to maintain the tax increase on transactions already subject to the IOF, such as foreign exchange and purchases of foreign currency, but to remove the tax on new transactions, such as "risk withdrawal."

This Tuesday (15), Congress installed the joint committee of the provisional measure (MP) with alternatives to the increase in the rate of the Tax on Financial Operations (IOF), with the presidency of Senator Renan Calheiros (MDB-AL) and the reporting of Deputy Carlos Zarattini (PT-SP).

Haddad needs compensation for IOF

There is no date for the full Supreme Court to hear the merits of the case. With the impasse continuing, the Ministry of Finance is now in the red.

Haddad has less than two weeks to find a solution before the release of the next bimonthly revenue and expenditure report, a document that assesses the state of public finances. Without an agreement with Congress, new budget freezes or cuts will be necessary.

"Pushing this string too far could be costly: the risk of contamination of other economic agendas is real and growing. The paralysis of the government's fiscal agenda is on the horizon," Felipe Salto of the Warren Rena consultancy noted in a statement.