AGU rejects proposed agreement by states on fuel ICMS

The AGU (Advocacy-General of the Union), an agency of the federal government, rejected a proposal made by the states on the rate of ICMS (Tax on Circulation of Goods and Services) that is levied on fuels.

The denial was made in a demonstration sent to the Minister of the STF (Federal Supreme Court) Gilmar Mendes, rapporteur of a lawsuit filed by President Jair Bolsonaro (PL) that asks for the suspension of laws of the states and the Federal District that fix these rates.

In a conciliation hearing last month, the states suggested, as a proposal, that the taxation of diesel be according to the average of the last 60 months, until the end of this year, among other items.

Based on a technical note from the Special Secretariat for the Treasury and Budget (a body of the Ministry of Economy), the AGU told the Supreme Court that the proposal “harms the reduction of inflation this year”.

“As the proposal goes against the recently passed legislation [pelo Congresso]the participation of the Legislative Power in the evaluation of the composition would be important”, points out the secretary.

It also states that the states’ proposal goes against the decision last month of Minister André Mendonça, who determined that the states charge the ICMS on diesel on a smaller calculation basis.

The AGU presented a counter-proposal to the states. The government’s suggestion is to monitor the impacts of laws that changed ICMS rules until the end of the first quarter of next year.

“If it is found, on the one hand, that the excess collection of recent years is consistent, there will be no modulation or compensation on either side”, says the AGU.

“On the other hand, if a relevant insufficiency of collection and possible weakening of public finances is detected, an Informative Report will be prepared to be attached to these records and sent to the Legislative Power for deliberation on the subject, removing, in any case, the possibility of compensation additional payments by the Union”, he adds.

Bolsonaro’s request against state laws, presented last month, was another of the government’s attempts to reduce fuel prices in an election year.

To the STF, the president claimed that the state rules on the subject are unconstitutional, as they set “abusive rates” of ICMS, higher “than that incident for operations in general”.

“The strong asymmetry of ICMS rates gives rise to problems that go far beyond the integrity of Brazilian fiscal federalism, especially burdening the final consumer, who ends up penalized with the high cost generated by excessive rates for fuels – which are essential inputs, and therefore , should be treated with modesty”, says the action signed by Bolsonaro.