Large-Scale Companies Pledge to Negotiate Actionable Rio State ICMS Tax Debt

RIO DE JANEIRO, BRAZIL – Five large-scale companies with debts to the Rio State government yesterday pledged to discuss the negotiation of their debt with the government and help reduce the state’s active debt, currently valued at R$106 billion (US$26.5 billion), during the parliamentary commission of inquiry (CPI) of the Rio de Janeiro Legislative Assembly (ALERJ), which investigates the Rio de Janeiro fiscal crisis. It is estimated that R$45 billion of this total is recoverable. These five companies’ debts amount to approximately R$3  billion.

The companies committing to the CPI were steel giant Companhia Siderúrgica Nacional (CSN), service station chain Ipiranga, electric power provider Light, energy provider Enel, and Raízen, which produces biofuels, sugar and ethanol.

“We succeeded in getting five companies liable for the unpaid [value-added] tax on the Circulation of Goods and Services (ICMS), to agree to sit at the negotiating table with the State Prosecutor General’s Office (PGE) and the State Treasury Office (SEFAZ) to see if we can improve the state’s cash-flow,” said the president of CPI, Deputy Luiz Paulo.

For the deputy, the problem requires much negotiation. He explained that the State Court of Auditors (ECA) would still need to verify why this methodology of debt collection “is failing to work” and what are the possible solutions. “We will include it in the committee’s final report and inform the ECA about it,” he said.

Collection system

According to State Prosecutor André Serra Alonso, there is a major issue with the legislative structure for collection. “The case law and statute restrict actions of stronger pressure against companies, which ends up in increasing the existing debt. This is in addition to the inherent complexity of our tax system,” he said.

Alonso said that the PGE has tried to structure itself differently, generating strategic action nuclei for large debtors and repeat debtors. “We have also sought a broader framework of agreements with the companies, but we cannot grant discounts since tax legislation does not permit them,” he said. According to him, the Prosecutor’s Office will liaise with the five companies and seek to define a payment method that reduces the amount of actionable tax debt.

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