Congress asks the Supreme Federal Court to validate the legislative decree that overturned the IOF increase imposed by the Lula administration.

BRASILIA - The Chamber of Deputies and the Federal Senate asked the Supreme Federal Court this Friday, 11, to declare constitutional the legislative decree approved by Congress that overturned the increase in the Tax on Financial Transactions (IOF) decreed by the Lula government.

The statement was filed four days before the conciliation hearing scheduled by STF Minister Alexandre de Moraes between the Legislative and Executive branches , to find a solution to the issue.

"The executive decrees were issued with a misappropriation of purpose, contradicting the extra-fiscal purpose that justifies the mitigation of the principles of legality and prior taxation. The factual elements demonstrate a revenue-raising motivation, revealed by official pronouncements and the fiscal context of the measure, distorting the required regulatory purpose," Congress emphasizes in the document.

The opinion was issued in the context of actions dealing with the IOF in the Supreme Court, considering a deadline that was given for the Legislature to comment on the lawsuits filed by political parties on the subject.

In the document, the Senate and Chamber of Deputies' legal departments argue that the decrees issued by the Luiz Inácio Lula da Silva administration regarding the IOF had "clearly revenue-generating objectives (harmonizing fiscal monetary policy, preserving the objectives of the new fiscal framework, with measures to balance revenues and expenses)."

"The Executive cannot, under the pretext of exercising a regulatory function, use §1 of article 153 - which deals with the Executive Branch's power to change the rates of some taxes - with the true purpose of collecting revenue, under penalty of misuse of purpose (also called misuse of power) and, ultimately, constitutional violation", the opinion states.

Congress argues that it approved the repeal of the Executive's decree because it "recognized the clear inconsistency between the purpose envisioned by the original constituent for the flexibility of taxpayer guarantees and the (real) purpose" of the Executive's measures.

The document also highlights, separately, the argument that the decrees of the Lula government "exceeded the powers of the competence conferred to the Executive by extending taxation to previously untaxed cases."

As Estadão/Broadcast showed, Centrão leaders signaled that they may accept an increase in the IOF only on modalities that were already taxed before the decree issued by Lula.