Reduction of ICMS on fuels is unconstitutional, say experts in action in the STF

Experts summoned by the Minister of the Federal Supreme Court Gilmar Mendes attested — unanimously — that the unification and reduction of ICMS on fuel proposed by Jair Bolsonaro (PL) and approved by Congress are unconstitutional.

The measure to lower the price of gasoline is one of the president’s strengths in his reelection effort and has become the target of a lawsuit filed in the Supreme Court by 11 states trying to reverse their loss of revenue.

The minister is the rapporteur of the direct action of unconstitutionality filed in June and determined the creation of a special commission, with representatives of the states, Congress and the Union, to try to reach an agreement.

The hearings have been taking place since August, without consensus. The most recent meeting, also unsuccessful, was on Wednesday (19). The special commission should work until November 4th.

Faced with the impasse, Gilmar Mendes summoned specialists to issue an opinion on the case. The initiative was approved by the special commission and, according to interlocutors of the ministers of the STF, the opinion of the experts indicates that the plenary of the Supreme Court may bar the measure.

force reduction

At the request of the Planalto, Congress passed complementary laws that unify and reduce ICMS rates on fuels and essential services. They now have a ceiling of 17%. Before, each state defined its percentage in the sale of products and services, reaching 34% in some cases.

The states claim, as a central legal argument presented to the STF, that the changes made by Congress invaded their autonomy. In addition, the laws do not clearly provide for compensation in the event of loss of revenue.

The states point to a sharp drop in revenues, since the ICMS charged on fuels represents up to 25% of the total collection resulting from this tax.

This year alone, the calculation made by Comsefaz, the council that brings together the state finance secretaries, is that the loss would be in the order of R$ 3 billion.

conciliation proposals

Representatives of the three parties involved — states, Congress and the Union — disagree with the three proposals that are being discussed in the commission as a way out of the problem.

One of them links the rate to the variation of Brent oil in the international market. Another idea is the creation of a fund, with resources from oil royalties, to stabilize fuel prices in high periods. There is also a suggestion to redistribute royalties to states and municipalities to the extent of the loss caused by the ICMS reduction.

The specialists have been participating in the meetings since the 11th. Their role in the process is equivalent to that of judicial experts, even having to sign a term of impartiality in the analysis of the legal aspects under discussion.

These eight experts, in unanimous agreement, considered that the complementary laws passed by Congress this year are unconstitutional.

One of the experts summoned, Clóvis Panzarini, former coordinator of Tax Administration of the São Paulo Finance Department, says that the laws have “unconstitutionalities, federative extravagances and conceptual inconsistencies that attack the federative pact”.

“Political decisions do not always go hand in hand with good intentions and economic efficiency,” Panzarini said during the meeting on the 11th.

In the opinion of Edilberto Lima, president of the Court of Auditors of the State of Ceará, the form of compensation to the states that has been adopted (via the states’ debts with the Union) is “very imperfect, because the states are very asymmetrical” in relation to debts with the Union.

“A model of compensation that is much more adequate through direct transfer, via the states’ participation fund”, he said.

Élida Graziane Pinto, a professor at FGV and attorney for the Public Ministry of Accounts of São Paulo, considers that, by inhibiting state collections, which also provide resources for municipalities, the Union practices “a kind of fiscal irresponsibility”, since the restriction collection “tends to constrain the financing of expenses that are not subject to contingency”.

Former Federal Revenue Secretary Everardo Maciel stated that the government’s measure “invades the competence of the states and the Federal District to dispose of rates” and is in “complete disagreement with the provisions of the Constitution”.

“There was an invasion of the competence of the states and the Federal District to deal with rates, and that, for me, makes [a lei] frankly unconstitutional,” said Maciel.