Tax Scandal May Cost Brazil Billions in Revenues

By Lise Alves, Senior Contributing Reporter

SÃO PAULO, BRAZIL – With the country still reeling from the corruption scandal in one of its largest and most important companies, oil giant Petrobras, Brazilians are now faced with a new financial scandal, this time occurring in a government agency (CARF) responsible for fines levied by Brazil’s Internal Revenue Service.

According to the country’s Federal Police, the kickback scheme may be much bigger than the Petrobras one, costing the country more than R$19 billion in unpaid fines by large companies.

“The investigations, launched in 2013, point to an organization which operated within the [government] agency to seek to influence and corrupt council members with the objective of nullifying or reducing the values of fines levied by the Federal Revenue Service,” said a statement released by the Federal Police on March 26th, to disclose Operação Zelotes (which in Portuguese means lack of zeal or enthusiasm).

The investigation is being led by the Federal Police, the Finance Ministry and the Federal Prosecutor’s Office. According to investigations, CARF council members reduced or threw out altogether fines for unpaid or undeclared taxes by companies in exchange for a percentage of the reduced fines.

“CARF employees would pass on privileged information, obtained within the Council to consultancy and law offices for them to obtain resources from these clients and intermediate ‘deals’ within the agency,” revealed the Federal Police statement.

Local media has reported that large companies are being investigated and that the latest corruption scandal may lead federal revenue losses to add up to billions of reais.