Rio: STF extends deadline for submission of requirements for Tax Recovery

The government of Rio de Janeiro has until August 15th to regularize the 110 social security certificates related to state agencies required by the Union to confirm the validity of the entry agreement in the Tax Recovery Regime, which according to the State Attorney General’s Office (PGE), will have the contract signed today (30), in digital form.

The date was determined by the Minister of the Federal Supreme Court (STF), Dias Toffoli, in response to a PGE petition that filed the court alleging that the Union added requirements four days before the stipulated deadline for signing the agreement. In the document, PGE asked the STF to order the Union to sign the RRF and the amendments within the stipulated period of June 30, without the conditions presented.

In the petition, PGE highlighted that there would not be enough time to comply with the new conditions. “The Union’s demand, never before considered, imposed on the eve of the deadline for the execution of contractual instruments indispensable for the renegotiation of the state public debt, denotes unexpected behavior (principle of trust), contradictory to the acts produced by itself. The requirement of regularization of certificates covering 110 CNPJ bodies of the Direct Administration, linked to the State itself, 4 days before the signing of the contracts that the Union has committed to sign in an agreement ratified by the Federal Supreme Court is also an affront to the principle of reasonableness. pointed to PGE.

Also in the petition, PGE pointed out to the minister that since the middle of last year, the state government has sought to meet the requirements for the agreement “Until the approval of this agreement is reached, since June 4, 2021, the date on which the request was granted. of joining the Tax Recovery Regime, the State of Rio de Janeiro has been going through a real crucis to overcome all the difficulties that have arisen. Some of them are apparently insurmountable, such as efforts, with legislative measures, to increase the rate of the social security contribution of public servants and authorization for the sale of equity interest in CEDAE”, he highlighted.

STF

The minister acknowledged that there was not enough time to forward the certificates to the Union as requested. The pending presentation of the certificates does not prevent the agreement from being signed today. However, if the government of the state of Rio does not meet the deadline given by August 15, it becomes invalid.

Tax Recovery

Since 2017, the state of Rio de Janeiro has been in the Tax Recovery Regime, which provides for the suspension of payment of installments of the state’s debt with the Union in exchange for fiscal adjustment measures, such as cutting spending, freezing civil servants’ salaries and local privatizations. In the first three years of validity alone, the state failed to pay BRL 92 billion to the Union.

In 2020 and 2021, Congress approved amendments to the RRF law, increasing the duration of the special regime from 6 to 10 years, with a 1-year deadline for submitting a new adjustment plan. The conditions for joining the RRF have been relaxed. The rapporteur’s amendments were removed from the state spending cap and the requirement that local SOEs be fully privatized, with local governments holding shares in the companies, was dropped.

With the changes, Rio de Janeiro presented a new Fiscal Recovery Plan to extend the debt longer and make adjustments with more lenient rules than in the original plan. The new plan would allow for the rescheduling of another R$52.5 billion in debt with the Union by 2030, in addition to the R$92 billion currently suspended. In January, however, the National Treasury issued an opinion against the proposals suggested by the state.