2:06

The decision by Minister Alexandre de Moraes, of the Federal Supreme Court (STF), on the IOF , represents in practice a victory of Congress over the Executive. By suspending both the Treasury decree and the act that overturned this decree, by Congress, what remained in force were the reduced tax rates, which was the desire of the parliamentarians.

Moraes, in turn, mitigated this defeat for the Executive by calling the parties to a conciliation hearing on the 15th. The minister's decision emphasized the dubious nature of the IOF increase, as shown by Estadão , which had both a revenue-generating purpose, which would be outside its scope, but also a regulatory purpose, which would be the aspect of the measure within the Constitution.

Soon after the decision, the president of the Chamber, Hugo Motta, took to social media to celebrate victory, stating that “the decision by Minister Alexandre de Moraes prevents the increase in the IOF in line with the wishes of the majority of the plenary of the Chamber of Deputies and society”.

At the same time, he said he is willing to negotiate, which opens up space to cool the temperature in the dispute between the Powers: “We remain open to institutional dialogue, with respect and serenity, always seeking to balance public accounts and sustainable economic growth,” said Mota.

On the one hand, Moraes stated that it is the Executive's responsibility to define the IOF rates, but, on the other hand, he alleged that there are reasonable doubts about the Treasury's intention, due to the revenue impact of the measure.

“This doubt regarding the purpose of issuing the Decree, pointed out by both Houses of the National Congress in the issuing of the Legislative Decree, is reasonable when the Ministry of Finance announced a potential increase of tens of billions to public accounts: R$20.5 billion in 2025 and R$41 billion in 2026,” said Moraes.

The minister, in turn, also sent messages to Congress, stating that the Legislative Decree Project (PDL), an act that suspended the Treasury's decision, also runs the risk of being unconstitutional. In this way, the minister alleviates one of the Lula government's fears, that Congress will trivialize this instrument, as it has already done with the overturning of presidential vetoes.

“This mechanism, however, cannot be directed against autonomous decrees, under penalty of being unconstitutional. Acts issued by the Chief Executive that do not materialize his regulatory power are not subject to repressive control by means of legislative decree,” said the minister.

The question remains whether it was worth it for the Executive to go through this political attrition, since there was a PSOL action to suspend the measure. The entry of the AGU into the process, at Lula's request, only had the effect of heightening tensions.

In the end, Moraes acted quickly, so as not to prolong the crisis, he gave victory to Congress, but found an honorable way out for the government to try to find a way out through negotiation.