Mendonça determines that states reduce ICMS on diesel and charges information from Petrobras

The Minister of the Federal Supreme Court (STF) André Mendonça determined this Friday (17) that the states charge the ICMS, a state tax, on diesel on a lower calculation basis as of July 1st.

The magistrate, raised to the post after being appointed by President Jair Bolsonaro (PL), also gave Petrobras five days to present “detailed information” on the criteria adopted by the company in its pricing policy over the last 60 months.

The decision was handed down on the same day that the company announced a new increase in fuel prices, unleashing the ire of the political class in Brasília. The issue is considered an obstacle to Bolsonaro’s and allies’ electoral pretensions.

Mendonça granted the injunction in the context of a lawsuit in which Bolsonaro questions the conduct of states in the regulation of the single ICMS rate on diesel, approved by the National Congress in March.

An agreement by Confaz (National Council for Finance Policy) established a single rate of R$ 1.006 per liter of fuel, but also provided for the possibility of discounts in each state. In practice, the mechanism was seen as a dribble so that state revenue remained at the same level as before the changes.

In the decision, Mendonça responded to the federal government’s request to suspend the entire agreement and determined that, as of July 1, the collection of ICMS rates on diesel will be made on the moving average of fuel prices in the last 60 months.

In practice, the measure will result in a drop in taxation of the product.

In relation to Petrobras, Mendonça states in his decision that the state finance secretaries have several times expressed concern about the effectiveness of cutting taxes to reduce consumer prices.

The minister says that, according to the states, the freezing of prices that serve as the basis for calculating ICMS since November 2021 has not had an effect because of the successive readjustments announced by Petrobras in fuels.

“If, on the one hand, it is a fact that the tax levy on fuels generates, to a greater or lesser extent, an impact on its price; on the other hand, both the Union and the States have pointed out the implication of other aspects of equal or greater amount, highlighting, among these factors, Petrobras’ pricing policy”, he says.

Mendonça stressed that the company, as a mixed-capital company of the Union and a member of the indirect public administration, must follow the Constitution and the laws that govern its activity, including the Petroleum Law and the State-owned Companies Law.

According to the minister, this includes principles such as transparency, the conciliation between free initiative and the social function of property and consumer protection, in addition to “compliance with the imperatives of national security, the relevant collective interest and its social function”.

The argument of Petrobras’ social role has been used by Bolsonaro and political allies in defense of a containment of readjustments by the company.

“It is urgent for this court to obtain additional information on the pricing policy practiced in the oil and natural gas markets, in accordance with Federal Law 9.478/1997 [Lei do Petróleo]in addition to the inspection measures adopted by Organs competent bodies in this area”, says Mendonça.

The minister asked the company for all documents that supported pricing decisions in the last 60 months and also requested “a copy of all documentation that supported its decision (including a copy of the decision-making act itself) regarding the adoption of the current pricing policy, specifically regarding the use of the International Parity Price – PPI, as a determining factor of this policy”.

The PPI is one of the main targets of Bolsonaro’s criticism, as it forces Petrobras to be in line with the prices practiced in the international market.

The collection of information was also directed to the ANP (National Agency for Oil, Gas and Biofuels) and to CADE (Administrative Council for Economic Defense).