Gasoline may rise up to 14% with resumption of federal taxes and higher ICMS

With no definition by President Luiz Inácio Lula da Silva (PT) on the extension of the federal exemption on fuels and with the unfreezing of the ICMS, a state tax, the price of gasoline in the country should rise, on average, 14.1% from of the beginning of the year.

The account is by consultant Dietmar Schupp, specializing in fuel taxation, who also estimates an average increase of 8% in the price of diesel and 6.5% in the price of hydrous ethanol.

The increases reflect the return of the collection of PIS/Cofins and Cide from January 1st and increases in prices used by states to calculate ICMS (a state tax) on products, which had been frozen since 2021.

Amid the debate over federal taxes, 18 states decided to raise the reference price for regular gasoline. In the case of diesel S-10, 24 states and the Federal District will raise the value. The price for calculating the tax on cooking gas will rise in 19 states and the Federal District.

For ICMS, the greatest impact will be felt by diesel consumers. According to Schupp, the increase in the reference price will result in an average increase of R$ 0.16 per liter in the price of diesel S-10. That is, even if Lula decides to extend the federal exemption, the consumer will feel it in his pocket.

ICMS has less impact on gasoline, but it also harms cooking gas consumers in some states. Industry sources estimate that the impact could reach BRL 5.86 per cylinder in Santa Catarina and BRL 5.01 in the Federal District.

They were the states with the highest increase in the value of ICMS on the product —45.10% and 38.52%, respectively. In two other states, São Paulo and Rondônia, the impact is greater than R$ 4 per 13-kilogram cylinder, which last week cost, on average in Brazil, R$ 108.73.

The Comsefaz (National Committee of Finance Secretaries) says that the ICMS is calculated based on surveys that “reflect the average prices effectively practiced by the market” and that the reduction of the tax by law in March caused “a real tax subsidy for the heteronomous tax waiver , prohibited by the Federal Constitution”.

As of April, the tax on gasoline and bottled gas will be charged in reais per liter, with a unified rate throughout the country. In the case of gasoline and ethanol, the charging model will still be debated until March.

Until then, states argue that the pre-freeze system should continue to apply, with revisions to these reference prices every 15 days based on surveys at gas stations.

In a statement, Fecombustíveis, which represents gas station owners, defended the maintenance of the federal exemption in January and criticized the revision of ICMS reference prices before the unified rate came into effect.

“It is necessary for the national consumer to be aware that the increase in costs at the pumps is not the station’s fault, but depends on the price composition of each product, which includes, among other components, taxes”, says the federation.

Last week, the states announced the new unified rates for diesel and cooking gas. If they went into effect today, they would raise product prices by 5% and 4% on average, respectively.

But the real impact will only be known on the eve of their effectiveness, since the calculation depends on what the price of fuel in refineries will be when the new rates come into effect. Gasoline was left out of the unification, for the time being, and there is still no new rate.

The prospect of higher fuel prices is already beginning to weigh on inflation expectations for 2023. Ativa Investimentos, for example, calculates that the resumption of federal tax collection will have an impact of 0.84 percentage points on the IPCA (the official inflation index of the country) of the year.

If the government chooses not to renew the exemption, says Ativa, the IPCA may close 2023 at 6%, against previous expectations of 5.1%. The broker estimates that the increase in revenue caused by the measure could reduce the fiscal deficit from R$ 143 billion to R$ 90 billion.

Economist André Coelho ponders, however, that the additional income “may make room for other expenses of equal value, which would nullify any gain”. “Thus, there are still great doubts whether the potential collection would be with a view to fiscal health in fact”, he says.