Gilmar Mendes, from the STF, creates a commission for states and the Union to discuss a solution for ICMS

Minister Gilmar Mendes, of the Federal Supreme Court (STF), determined this Monday (18) the creation of a special commission to discuss a solution that reconciles the interests of the Union and the states in the impasse regarding the ICMS (Tax on Circulation of Goods and Services) on fuel.

This commission should listen to specialists in public accounts and in ICMS collection, “who have extensive experience in the topics in debate, directly and indirectly”.

Gilmar is the rapporteur of a lawsuit filed by President Jair Bolsonaro (PL) that asks for the suspension of laws in the states and the Federal District that set these rates, on the grounds that these rules are unconstitutional.

It also reports a lawsuit filed by governors against a law passed by Congress and sanctioned by Bolsonaro that limits the ICMS rate charged on services considered essential, such as fuel, electricity, public transport and communications.

Bolsonaro’s request against state laws, presented last month, alleged that state rules on the subject are unconstitutional, as they set “abusive rates” of ICMS, higher “than that incident for operations in general”.

The states, on the other hand, claimed that the law passed in Congress caused revenue losses.

The states, the Federal District and the Union will have five days to inform the representatives who will participate in this commission, which will be mediated by the assistant judge Diego Veras and will have the minister’s chief of staff, Paulo Maia, as an observer.

In this commission, the Union —including Executive and Legislative — will appoint up to five representatives. All states and the Federal District must indicate, at most, another five.

The commission’s work will begin on August 2nd and the initial deadline for its closing will be on November 4th of this year.

The commission, according to the minister, should present “proposals for a solution to the federative impasse in both actions”, but may also deal with other issues on the subject that are being processed in the Supreme, provided that there is consent of the respective rapporteurs.

There is a judicialization in this sense also in action that is under the rapporteur of Minister André Mendonça.

In addition, the members of the commission must “subsidize elements to assess the alleged increase in the collection/cash balance of subnational entities (flow of financial assets in comparison with previous years) and the loss caused by the impact arising from the aforementioned complementary laws”.

Last week, the AGU (Advocacy-General of the Union), an agency of the federal government, had rejected a proposal made by the states on the ICMS rate levied on fuels.

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]it would be important for the Legislative Power to participate in the evaluation of the composition”, pointed out the secretary.

He also stated that the states’ proposal goes against the decision of Minister André Mendonça last month, which determined that the states charge the ICMS on diesel on a lower calculation basis.

The AGU presented a counter-proposal to the states. The government’s suggestion was 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”, said 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 added.

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