Minister André Mendonça, of the Federal Supreme Court (STF), gave 48 hours an “unextendable” period for all states and the Federal District to provide information in the action in which the government tries to guarantee a reduction in the ICMS charge on diesel by States.
The magistrate authorized all the finance secretaries of Confaz (National Council of Finance Policy) to be officially part of the process in the Supreme, and determined that the states provide information on the ICMS rates on fuels that were charged in the last 60 months, in addition to of the amounts collected. The period is mentioned in the law as a reference for a transitional rate, which would apply until a new model was instituted. The states have yet to respond.
Faced with the lack of consensus, the government returned to the STF to try to cancel the states’ maneuver to circumvent the law that instituted a new tax collection model. In the new order, the AGU asks for the cancellation of the Confaz agreement, which established a single rate of R$ 1.006 per liter of fuel, as a possibility of discounts in each state.
Mendonça did not issue a precautionary measure suspending the agreement, but agreed to evaluate new requests from the AGU (Advocacy-General of the Union) for it to grant a new injunction to fully suspend a rule contrary to the law that established a single ICMS rate by the states.
On the 13th, Mendonça had already granted an injunction determining the suspension of clauses in the agreement drawn up by the states to avoid complying with legislation approved by Congress, which determined a reduction in the collection of tax on fuel.
Last Friday (20), the AGU added the action, asking for the overthrow of the entire agreement, and also requested that Mendonça hold a public hearing to discuss the collection of rates by state administrations.
Soaring fuel prices are a factor of wear and tear for Bolsonaro
The action brought by the government takes place at a time of high fuel prices. Soaring prices at pumps have been a factor of wear and tear for President Jair Bolsonaro (PL) in the year he intends to seek re-election to the Planalto Palace.
A law passed by the National Congress and sanctioned by the Chief Executive provides for the adoption of a single ICMS rate on fuels, to be regulated by Confaz. The collegiate is formed by representatives of the Ministry of Economy and the state secretaries of Finance.
States had tailored a maximum tax rate with individual “equalization factors” for each state — in practice, they could keep the charge at the same levels as before the new law.
The format was the way found to comply with the law without imposing a burden on governors, whether financial (due to the loss of revenue) or political (to increase the tax burden in their states). For the federal government, however, the regulation represents a circumvention of the law.
In a new request to Mendonça, the Union also wants to force states to adopt, within 30 days, a new ICMS regulation on fuels. Otherwise, the transition rule already provided for in the law will apply — which results in loss of revenue for state governments.
In the case of diesel, the text provided for a transition rule, with the calculation of the tax on an average price of the last five years, which would be in force while the new rate was not regulated.
This rule was the government’s bet to lower the state’s collection by force. Opposing the change, the state secretaries sewed the speedy approval of the regulation to avoid loss of revenue.
In this Tuesday’s decision (24), the minister also requested information on “the rates practiced in operations with goods and merchandise, for which there is no specific rate forecast” and “the average proportional weights of ICMS in the formation of final prices of fuels practiced within the scope of their respective jurisdictions”.
A previous decision by the minister, also at the request of the AGU, only suspended the application of discounts applied by states on the maximum rate of R$ 1.006 on diesel.
The first injunction generated a confusion of interpretations that so far has not evolved into an operational difficulty because the new rates only come into effect on July 1, when the ICMS freeze started in September 2021 ends.
The states warned that the suspension of the so-called “equalization factor” alone could have the opposite effect to what was desired, raising the price of fuel at the pumps, as shown by the Sheet.
The Comsefaz (National Committee of Secretaries of Finance, Finance, Revenue or Taxation of the States and the Federal District) estimated, in a technical note, that the average high could exceed R$ 0.20 per liter in some regions, if the decision were maintained. .
The federal government, on the other hand, wanted to use the first decision to force a change in the Confaz (National Council for Finance Policy) agreement that established the uniform rate and called an extraordinary meeting for last Thursday (19), but the strategy did not work.
In the new action, the AGU says that the Confaz agreement on the new rates “perpetuated the real intention of maintaining the status quo” and had “a clear objective of circumventing the command of the derived constituent, materialized by the legislator”.
Charging at the maximum rate, he continues, would end up “aggravating the impacts of higher fuel prices on consumers, as well as having severe consequences on macroeconomic data, such as inflation.”
The new rate would only apply from July, when the ICMS freeze started in 2021 ends. Mendonça has not yet suspended it and has given the states five days to submit information they deem relevant on the subject.
The charging of ICMS at a single national rate is also defended by the fuel sector, on the grounds that it simplifies the tax system and reduces the possibility of fraud in interstate operations.
The states resist claiming that the unification of rates represents a loss of revenue for those who charge more and an increase in prices for those who charge less.
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