Brazilian Federal Treasury excludes R$ 5 billion from outstanding debt.

The Attorney General's Office for the National Treasury (PGFN) canceled 621,000 entries in the Union's active debt that were time-barred, totaling approximately R$ 5 billion. This was the first exclusion made through data cross-referencing, electronically.

“Until now, we were doing the exclusion manually, looking at each case individually. We wouldn't be able to clear even a thousand cases,” says prosecutor João Grognet, general coordinator of Credit Recovery Strategies at the PGFN (Brazilian Federal Attorney General's Office).

According to him, the debts expired because no assets were found for seizure. "If the judge suspends the tax enforcement proceedings without locating the debtor's assets, after five or six years he calls the Attorney General's Office and terminates the process," he says. "Now is the time to clean up the portfolio and avoid improper collection."

Judges apply the deadline set by the Superior Court of Justice (STJ) for what is called intercurrent prescription. The ministers understand that the archiving of tax enforcement proceedings for more than five years extinguishes tax credits. "These are unrecoverable debts; if there were any chance of recovery, we would have already seen it," says the prosecutor.

The oldest debts, now excluded, were registered as outstanding in the 1980s, which doesn't mean they've been inactive since then. Most were included between 1997 and 2011. "It's possible the taxpayer was disputing, lost, and had a telephone line as collateral, which isn't even worth seizing now, and we couldn't find other assets," says Grognet.

The exclusion prevents the PGFN (Attorney General's Office for the National Treasury) from paying legal fees, which could occur if the judge, at the request of the other party, determined the statute of limitations had expired. Furthermore, it removes from the courts a case that should no longer be proceeding, according to the prosecutor.

“While I am dedicating myself to something that will lead to nothing, I am not thinking about the useful process,” states Judge Manoel Rolim Campbell Penna, of the 6th Federal Tax Enforcement Court of Rio de Janeiro. The magistrate, who was previously a public prosecutor, says that tax enforcement was a very inefficient process that “depended on official documents, on paper.”

From that time, the judge adds, emerged a collection of tax enforcement cases that were just "piles of paper." "These are cases that were clogging up the Judiciary, they weren't going anywhere and they were just being archived."

In the 6th Court, every six months the magistrate reviews the cases that are about to expire. "There are tens of thousands," says the judge. He adds that it's not a matter of loss or waste. "The debt has already expired and there's nothing that can be done to prevent it from expiring."

Source: Valor Econômico