Treasury says it will prove to the STF that the increase in IOF has no revenue-raising bias

The government of President Luiz Inácio Lula da Silva (PT) intends to prove to the Federal Supreme Court (STF) that the decree that would increase the IOF did not have the main objective of increasing revenue, but rather to act as a regulatory instrument on the exchange, credit and insurance markets.

The statement was made by the executive secretary of the Ministry of Finance, Dario Durigan, after Minister Alexandre de Moraes suspended both the presidential decree that raised the tax and the legislative decree approved by Congress that revoked the increase.

“I think we are in a position to overcome this argumentative burden, to show that it is not for revenue-raising purposes, even though it has a revenue-raising consequence. We can present it in a rational and technical manner to the Supreme Court,” he said in an interview with Folha de S. Paulo published this Saturday (5).

Moraes suspended the decrees last Friday (4) and scheduled a conciliation hearing for the 15th. In this hearing, the government will have the burden of proof to demonstrate that the measure has a regulatory and not merely fiscal nature.

Durigan highlighted that Moraes' position reinforces the interpretation that it is not up to Congress to issue a legislative decree to nullify an act of the Executive that is within the legal limits. According to him, the judge recognized that a legislative decree is not appropriate to challenge a regular act of the Executive.

“If there were a challenge to this decree, it would have to be made in the Supreme Court,” he pointed out.

The secretary considered Moraes' decision consistent with the understanding of the Attorney General's Office (AGU), which seeks to preserve the constitutional competence of the President of the Republic to issue decrees based on the Constitution.

Durigan admitted, however, that the suspension of the measure could have an impact on the year's budget balance – something that had been reiterated by both the government's economic team and its own allies.

“If you take it away, there will be a consequence. It’s math, you’ll have to make more or less contingency plans,” he said, acknowledging that, without the resources provided for with the IOF collection, it will be necessary to promote a greater block on the expenses provided for in the 2025 Budget.

Despite the disagreements between the Executive and Legislative branches regarding the tax increase, the secretary reiterated the government's willingness to maintain an open dialogue with the National Congress. He also defended the role of the AGU in establishing, through the judicialization of the issue, the limits of action between the branches of government.

“But we don’t want to close the debate here. We can and should continue debating with the Supreme Court, with Congress, whatever it may be. Conciliation can point to the future,” he concluded.

Moraes alleged last Friday (4) that both the government and Congress may have failed to comply with constitutional norms when issuing the decrees. On the part of the economic team, it was to use a regulatory tax to increase revenue. And, on the part of the Legislature, it was to go against a prerogative of the President of the Republic.