The Brazilian Federal Supreme Court began the trial of Direct Action for the Declaration of Unconstitutionality (ADI) No. 7,276, which concerns the constitutionality of provisions contained in an agreement of the National Council of Fiscal Policy (Confaz) that establishes the obligation for financial institutions to share customer data with state tax authorities during electronic transactions for the collection of the Tax on Circulation of Goods and Services (ICMS)[1].
Following the votes of Justice Cármen Lúcia (Rapporteur), Justice Alexandre de Moraes, and Justice Edson Fachin, which turned the analysis of the precautionary measure into a merits judgment to: a) partially recognize this direct action of unconstitutionality only in relation to the second, third, fourth, and sole paragraph of the sixth clause of ICMS Agreement No. 134/2016, issued by Confaz; b) in the recognized part, deny the request presented in this action. In turn, Justice Gilmar Mendes requested more time to examine the case thoroughly.
It is important to clarify that ICMS Agreement No. 134/2016, concluded between state governments and members of Confaz, stipulates that banks are obligated to report all operations carried out by individuals and legal entities, notably those conducted through PIX[2], debit and credit cards, and other transactions made for tax payment electronically.
The Direct Action for the Declaration of Unconstitutionality was initiated by the National Council of the Financial System (Consif), focusing its argument on the assertion that the norm, under the pretext of establishing ancillary obligations in the context of ICMS collection, would be demanding that financial institutions disclose customer information protected by banking secrecy.
The central point of the controversy revolves around the conflict between the right to privacy, enshrined in the Federal Constitution, especially in its Article 5, paragraph X, which ensures the inviolability of intimacy and private life, and the State’s need to obtain information for the effective exercise of its supervisory function.
Therefore, the decision of the Supreme Court will not only shape the dynamics between citizens, financial institutions, and state tax authorities but will also influence legal certainty in the tax field. A sensible balance between fiscal effectiveness and the protection of individual rights is imperative to preserve taxpayers’ privacy.
Regardless of the outcome of the trial, it is imperative that the Supreme Court (STF) and lawmakers be attentive to the urgent need to establish transparent and judicious guidelines for accessing and sharing banking data, as the absence of clear regulation can result in severe implications regarding citizens’ privacy and legal security.
[1] State VAT.
[2] A Brazilian instant payment transfer system.