Fux interrupts trial on Zanin’s decision that suspended exemption

The Minister of the Federal Supreme Court (STF) Luiz Fux requested a review and interrupted the trial on Cristiano Zanin’s decision that suspended the payroll exemption for 17 sectors of the economy and municipalities. This Thursday (25), Zanin granted an injunction and responded to the request of the Attorney General’s Office (AGU) to suspend the law approved by Congress.

Parliamentarians extended the exemption until 2027. The minister forwarded the individual decision for analysis by the Court in the virtual plenary. Until the trial was interrupted, the score was 5-0 to keep the exemption suspended. The ministers followed the rapporteur’s understanding: Gilmar Mendes, Flávio Dino, Edson Fachin and Luís Roberto Barroso.

With the request for review, Fux has 90 days to analyze the process. According to the STF’s internal regulations, after this period the action is released for trial. Zanin’s decision remains in force during this period.

In the preliminary injunction, he accepted the Lula government’s arguments and pointed out that the budgetary impacts of the measure were not presented and, as a result, “a significant imbalance in public accounts and an emptying of the constitutionalized fiscal regime” could occur.

The decision was criticized by the president of the Senate, Rodrigo Pacheco (PSD-MG). He classified the AGU’s decision to judicialize the issue as “catastrophic”. The Senate’s legal team appealed early Friday night (26) to the Supreme Court to suspend Zanin’s decision.

The Senate’s lawyers highlighted that the exemption does not cause losses to public accounts. “The conclusion that the law in question has in some way imposed excessive or unreasonable expenditure on the Executive, or that it could cause the depletion of the Union’s fiscal regime, is sadly mistaken,” said the lawyers.

Conflict over exemption has been going on since last year

In 2023, the bill extending the exemption until 2027 was approved by a large majority by Congress. The initiative was vetoed by Lula, but the veto was overturned by parliamentarians. However, in December, the government tried to implement the reinstatement through provisional measure (MP) 1,202/2023, but political pressure and pressure from the affected sectors caused the Executive to back down.

The government then decided to maintain the exemption, but sent a bill to Congress with the proposal for gradual tax relief for the 17 sectors. The text was still analyzed. The re-encumbrance of municipalities was maintained in the MP, but Pacheco let this part of the proposal lapse. With this, he guaranteed tax relief for city halls. On Wednesday (24), the AGU called the Supreme Court to overturn the exemption and obtained a favorable decision from Zanin.

Affected sectors employ more than 9 million people

The payroll tax relief affects 17 sectors, which employ more than 9 million people. The measure guarantees that companies pay rates of 1% to 4.5% on gross revenue instead of 20% on payroll as employer social security contributions. Furthermore, the exemption also impacts the social security accounts of municipalities with up to 156.7 thousand inhabitants.

The exemption benefits sectors such as clothing and clothing; footwear; construction; call center; communication; construction companies and infrastructure works; leather; manufacturing of vehicles and bodies; machines and equipment; animal protein; textile; information technology (IT); communication technology (ICT); integrated circuit design; metro rail passenger transport; public road transport; and road freight transport.

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