Chamber approves basic text of project that limits ICMS on fuels

The Chamber of Deputies approved this Tuesday (14) the complementary bill that establishes a limit for the rates of ICMS (state tax) levied on fuel, energy, transport and telecommunications.

The basic text was approved by 348 votes. Technical problems prevented the voting of highlights (proposals to modify the text), which will be appreciated this Wednesday (15). Then the project goes to the sanction of President Jair Bolsonaro (PL).

The fuel tax cut is the Bolsonaro government’s main bet to reduce the price at the pumps and try to contain inflation. With less than four months to go before the election, the rise in prices is one of the main reasons for weariness for the president, in the opinion of members of his campaign.

Bolsonaro has been waging a war with governors, accused of maintaining state tax rates and thus preventing prices from falling.

The version approved by the federal deputies represents an even more severe defeat for the governors, given that the small gains with the alterations in the Senate were removed from the proposal in the House.

The so-called PLP 18 transforms fuel, energy, telecommunications and transport into essential goods. As a result, they now have a maximum limit of 17% and 18% of ICMS. In some states, such as Rio de Janeiro, this means that the rate can be reduced by half.

The rapporteur of the proposal in the Chamber, Elmar Nascimento (União Brasil-BA), reversed some measures that had been included in the Senate to soften the impact. The main one refers to the trigger that allows compensation for states.

The original proposal approved by the Chamber provided for compensation whenever the total revenue fell by more than 5%.

The Senate rapporteur, Fernando Bezerra Coelho (MDB-PE), had amended the text to determine that the 5% variation should refer only to the drop in the collection of the four items — fuel, energy, telecommunications and transport. In addition, Bezerra accepted an amendment that provided for the inflation in the period to be considered to determine the variation, a measure that pleased the governors.

Nascimento discarded the changes and resumed the first version, which considers a 5% variation on the entire state collection.

In another measure contrary to the interests of the states, the rapporteur decided to rescue a mechanism included by the Chamber in the first vote and later withdrawn by the senators. The device prohibited states that already had rates below 17% from promoting increases to reach the limit stipulated in the text.

The text approved by the deputies, on the other hand, maintained other measures that give immediate relief to the states – which claim that they will have losses of around R$ 80 billion. The Senate had determined that the states would be compensated with a reduction in debt payments, in order to facilitate the flow and have a more instantaneous counterpart, and not in the debt stock.

Another amendment by the senators and maintained in the Chamber provides for the inclusion of mechanisms to compensate states that have losses greater than 5%, but do not have debts with the Union. In 2023, they will receive part of the federal government’s share of the CFEM (Financial Compensation for the Exploration of Mineral Resources). The Senate rapporteur said that five states could fall into this situation, and the impact will be up to R$3 billion.

This group will also have priority in obtaining new loans from banks and other institutions.

Elmar Nascimento maintained the mechanism that guarantees full compensation from Fundeb (fund for basic education) to pay the constitutional minimum for health and education. The proposal was not included in the main text approved by the senators, but was included after being voted on separately. The rapporteur in the Chamber maintained the change.

The text also includes the measures that had been announced by Bolsonaro to contain the price of fuel, at a time of high inflation and when the president is seeking reelection. The reduction to zero of the Cide-Combustíveis, PIS and Cofins rates levied on gasoline until December 31, 2022. These measures will represent a tax waiver by the federal government of R$ 17 billion.

The rapporteur also specified the CNG (Vehicle Natural Gas) as a product that had a zero rate.

The project had as one of its main supporters the president of the Chamber, Arthur Lira (PP-AL), who endorsed Bolsonaro’s speech against the governors.

In an interview with CNN Brasil this Tuesday afternoon, Lira denied that Congress intends to reduce state revenue, qualified by the deputy as abusive.

“We will go from a forecast of high collection in these items that are being regulated from R$ 116 billion more than in 2021 to possibly R$ 70 billion, R$ 80 billion in 2022”, he said.

He stressed that there will be no drop in revenue for the states, but a growing decrease in collection on fuel, energy and communications that will be offset by the heating of the economy, increased consumption and lower evasion, in addition to growth in collection.

“Essentiality directly affects the abusive collection problem of states, which are not having a crisis. They are increasing their civil service in an even irresponsible way, increasing the fiscal responsibility index from 30-something to 48%, 50%. a policy, against the grain of the crisis, of a lot of populism in their states”, he said.

The text is the first of three proposals articulated between the National Congress and the government, to try to reduce the price of fuel. Senator Fernando Bezerra had estimated that the entry into force of the three measures could lead to a reduction of R$ 1.65 in the value of a liter of gasoline and of R$ 0.76, in the liter of diesel.

The second proposal, approved in the Senate also this Tuesday (14), is the PEC (Proposed Amendment to the Constitution) that seeks to maintain the competitiveness of ethanol and other biofuels, in the face of tax reductions for fossil fuels. The proposal provides for a “favored tax regime for biofuels intended for final consumption”.

The Biofuels PEC now needs to be voted on by the Chamber of Deputies, although there is still no date set.

The other measure, which should be on the Senate agenda next week, provides for the transfer by the Union of up to R$ 29.6 billion to states that agree to zero their fuel rates.