Congress overturns veto and restores mechanisms to compensate states for ICMS losses

The National Congress this Thursday (14) overturned vetoes by President Jair Bolsonaro (PL) of the bill that limits fuel taxes and reinstated provisions that provide for compensation to states for the loss of revenue.

On the other hand, there was no agreement regarding the veto on the device that sought to guarantee the recomposition of funds for health and education in the event of damage to these areas due to loss of revenue. This item will be voted on separately in a session after the end of the parliamentary recess.

Articulated by the president of the Chamber, Arthur Lira (PP-AL), the bill was one of the federal government’s bets to reduce fuel prices.

The bill approved by deputies and senators provides for the establishment of a ceiling of 17% for the ICMS (Tax on the Circulation of Goods and Services) that is levied on fuel, energy, telecommunications and transport. The tax limitation would be possible because these items are now considered essential.

After the project was sanctioned, several states have already reduced their rates and there has been a reduction in the price applied at fuel pumps.

Jair Bolsonaro sanctioned the project, but on the other hand vetoed items that provided for compensation to states and municipalities.

During its process, the parliamentarians included a provision that provides for a “trigger” that allows states to write off debts with the Union, if the measures provided for in the proposal lead to a drop of more than 5% in total ICMS collection.

Bolsonaro maintained this mechanism, but on the other hand vetoed all the provisions that dealt with this compensation and the way in which it would take place. And these were the items whose vetoes were overturned by deputies and senators in the National Congress session.

With this, the provisions that provide, for example, that the total losses of ICMS collection of the states would compose the balance to be deducted by the Union are resumed.

Another provision that has been re-established provides that states without debts to the Federal Government and which record revenue losses due to the ICMS limitation may have the compensation made in the 2023 fiscal year through the appropriation of the Federal portion related to the CFEM (Financial Compensation for the Exploration of Mineral Resources), up to the limit of loss.