In 2024, the Supreme Federal Court (STF) resolved Extraordinary Appeal (RE) 1346152, which dealt with the application of monetary correction indices and default interest by municipalities. The court decided that city halls cannot set rates higher than those defined by the Union for tax credits, consolidating the discussion in Topic 1,217 with general repercussion.
The case originated from the challenge by the Municipality of São Paulo against the decision of the São Paulo Court of Justice (TJ-SP), which deemed illegal the charging of amounts above the Selic rate on municipal taxes. The municipal law in question authorized interest and corrections higher than the basic rate defined by the federal government, which is why the state court, favorable to the taxpayer, suspended this practice.
Minister Cármen Lúcia emphasized in the judgment that the competence to regulate the financial conditions of tax credits lies with the Union, and therefore municipalities must comply with the limits established in this regard. Furthermore, she stated that it is not up to city halls to legislate concurrently or autonomously on correction indices and default interest of their tax credits.
According to the STF, the Selic rate, which represents the cost of federal public securities, serves as a reference for the remuneration of tax credits throughout the country. If each municipality established its own indices, these divergent parameters would hinder the uniform execution of monetary policy made by the Central Bank of Brazil, which would contradict the prevailing federative principle.
On the other hand, the municipality argued that its legislation adopted the Broad Consumer Price Index (IPCA), released by the Brazilian Institute of Geography and Statistics (IBGE), as a standard for correcting tax debts. It also argued that restricting adoption to only the Selic would impair the autonomy of more than five thousand Brazilian municipalities, impacting local budget planning, especially when higher indices are applied.
The STF, however, reinforced the Union’s prevalence in the supplementary control of financial rules for tax credits, preventing the creation of parallel municipal rules that may alter the system of financial charges throughout the country. In this way, it ensured that the application of monetary correction and default interest is unique and uniform for the Union and municipalities.
The conclusion of the process still depends on the application of the thesis defined in all judicial instances, which will affect similar cases throughout the national territory. Thus, the established understanding should guide future decisions regarding the charging of financial charges by municipal administrations, consolidating the Union’s regulatory role on the topic.
