States accept to cut ICMS until the end of the year, but want full compensation from the Union

The states presented to the STF (Supreme Federal Court) a proposal for conciliation for the impasse with the federal government regarding the tax reduction on fuels and other items. They agreed to cut the ICMS (Tax on the Circulation of Goods and Services), but they want to be fully reimbursed by the Union.

Minister André Mendonça, rapporteur for the action in the STF that analyzes the ICMS cuts, gave the federal government and the Senate 24 hours to express their views on the suggestion. After that, he will decide whether to endorse an agreement between the parties or, if there is no consensus, whether to act through an injunction (provisionally).

The discussion in the STF began after Congress passed a bill to reduce taxes on diesel and states regulated the text in such a way that there were no practical changes. The government then filed a request to declare the Comsefaz decision (committee of state finance secretaries) unconstitutional.

At the beginning of the month, Mendonça had determined that the Union and the states would close an agreement by Tuesday (14). He considered that the problem needed an “urgent and immediate solution, given the fuel price crisis that is ravaging the country.”

Even if there is no agreement until the 14th and the minister provisionally decides on the case, those involved will be able to present, later on, a new proposal that reconciles all interests.

The discussions in the STF involve, in addition to the law that changed the taxation of diesel, another bill under discussion in Congress that limits the ICMS on fuels, collective transport, electricity and telecommunications, considering them to be essential goods and services (a previous decision of the STF prohibits ICMS taxation higher than the general for such items).

In the proposal presented this Monday, the states gave in in part and suggested reducing the tax calculation base on these items until the end of 2022, so that the effective tax burden corresponds to the application of the general rate of each state (and not higher percentages). high, as is the case in much of the country today).

In exchange, they ask the Union to fully compensate them for the losses, using revenues or debt relief with the National Treasury. The governors would also be compensated even for the freezing, until the end of 2022, of the Weighted Average Price to the Final Consumer (PMPF, value raised from a survey of values ​​in the gas stations and which serves as the basis for state taxation on fuel).

Compensation would be triggered when a 5% drop in tax revenues is observed in the items under discussion in relation to the same periods last year.

As stated to Sheet, the government rejects Comsefaz’s proposal. The economic team is against the proposal of full compensation for the changes under discussion or agreements that include compensation for the transformation of the items under discussion into essentials.

The states still propose that the essentiality of electricity and telecommunications will only be required from 2024 onwards, according to the previous understanding of the STF. The objective is to prevent the Legislature from anticipating this deadline (like trying to make the bill in the Senate).

State secretaries also suggest a gradual reduction, starting in 2023, of the rates applicable to operations with diesel and LPG (cooking gas) until reaching, in 2025, the modal rate of each state.

In addition, if the proposal is accepted, there would be a return to the current taxation rules for gasoline and alcohol from 2023.