Congress overturns Bolsonaro’s veto and resumes compensation for health and education due to the drop in ICMS

The National Congress overturned this Thursday (15) more vetoes by President Jair Bolsonaro (PL) to the bill that limits state taxes on fuel, reestablishing that the Union will be obliged to compensate states and municipalities to guarantee that the constitutional health minimums and education are not affected by the drop in revenue.

Compensation is also guaranteed so that Fundeb, mainly a basic education financing mechanism, has the same financial availability as before the tax limitation.

The vetoes were overturned in a symbolic vote by deputies and senators.

In June this year, Bolsonaro sanctioned the complementary bill that set a ceiling for ICMS rates on fuel, energy, transport and telecommunications. Articulated by the mayor, Arthur Lira (PP-AL), the proposal was the federal government’s big bet to reduce fuel prices.

With the new law, states were obliged to implement a ceiling of 17% or 18%, depending on the location, in their ICMS rates on fuel, energy, telecommunications and transport, items considered essential.

Bolsonaro, however, vetoed the device that sought to ensure the recomposition of funds for health and education in case of damage to these areas due to the loss of revenue.

One of the three provisions whose vetoes were overturned this Thursday (15th) provides that, in case of loss of revenue due to the new law, the Union is obliged to compensate “the other entities of the Federation so that the constitutional minimums of health and of education and Fundeb have the same financial availability in comparison with the situation in force before this Complementary Law”.

The overthrow of the vetoes also resumed the determination that states and municipalities should maintain the proportional execution of constitutional minimum expenditures on health and education in comparison with the situation before the law.

The other device whose veto was overturned provides that these constitutional obligations will be maintained by the states and municipalities, in proportion to the debts that these entities have with the Union or that are managed by the National Treasury Secretariat.

These were not Jair Bolsonaro’s first vetoes to the law that limited fuel taxes that were overturned by the National Congress. In July, the deputies and senators reinstated the devices that provide compensation to the states for the loss of revenue.

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

Bolsonaro maintained this mechanism, but vetoed all devices that dealt with this compensation and how it would be carried out. And these were the items whose vetoes were overturned by deputies and senators in the previous session of the National Congress.

At the time, provisions were resumed that provide, for example, that the total loss of ICMS collection of the states would compose the balance to be deducted by the Union.

Another device that was reinstated provides that states with no debts to the Union and that record collection losses due to the ICMS limitation may have compensation made in the 2023 fiscal year through the appropriation of the Union’s portion related to CFEM (Financial Compensation for Exploitation of Mineral resources)