IOF crisis: Government sees STF as 'last alternative' and demands fiscal solution from Congress

After admitting to Folha de S.Paulo that he could appeal to the Supreme Federal Court to restore the IOF increase, Finance Minister Fernando Haddad made the Planalto activate crisis containment mode. The order now is to find a political solution before any legal action.

Haddad's statement displeased part of the economic team, which sees going to the Supreme Court as just a "last resort". For now, the strategy is to calm things down: Lula (PT) intends to talk to the presidents of the Chamber of Deputies, Hugo Motta (Republicanos-PB), and of the Senate, Davi Alcolumbre (União-AP), in Brasília. The judicial offensive, therefore, has gone off the radar, at least for now.

Even so, the Attorney General's Office confirmed this Friday the 27th that it has initiated technical procedures to evaluate a possible action in the Supreme Court against the Congress' decision. The measure, according to the AGU, was requested by President Lula, but there is still no decision made on whether to take the case to court.

“At this time, the AGU requested information from the Ministry of Finance to support the studies. As soon as the legal analysis is finalized, the AGU will release the decision adopted,” the ministry reported.

Solution via Congress

“If Congress overturned [the increase], they should come up with a solution,” a spokesperson from the economic team told CartaCapital , making the Executive’s discomfort clear. The reading in Planalto is simple: the Legislature needs to indicate how to compensate for the loss of revenue — preferably without new taxes, a path already rejected by Motta.

While Lula tries to put together a deal, the Treasury Department is considering budget cuts and other sources of revenue. None of these, however, will be announced before the president tests the political path with the heads of both houses.