The Jair Bolsonaro government (PL) is preparing a PEC (proposed amendment to the Constitution) to authorize the temporary reduction of taxes on fuel and electricity, in an attempt to give relief to consumers’ pockets in an election year.
The choice of the PEC as an instrument is a way of overcoming the restrictions imposed by the LRF (Fiscal Responsibility Law), which in these cases requires the increase of another tax to compensate for the loss of collection.
“We have a proposal for an amendment to the Constitution that is being negotiated so that we can have the possibility of zeroing fuel taxes, PIS/Cofins. fair (20) during its weekly live. The president is on an official trip to Suriname.
If the government eliminates PIS/Cofins rates on gasoline, diesel and ethanol, the impact on revenue will be in the order of R$50 billion a year, according to government sources informed to leaf.
Under current rules, the government would have to raise other taxes to compensate for lost revenue.
In 2018, under Michel Temer (MDB), and in March and April 2021, under the current administration, measures to reduce the tax burden on diesel were accompanied by raising taxes for other sectors.
Measures to reduce fuel taxation have been discussed between Bolsonaro and assistants at Palácio do Planalto. The plan was published by the newspaper O Globo and confirmed by leaf.
Earlier this week, the issue was also discussed by the president at a meeting with ministers Bento Albuquerque (Mines and Energy), Rogério Marinho (Regional Development) and Bruno Bianco (Advocacy-General of the Union).
Interlocutors claim that the Minister of Economy, Paulo Guedes, is not opposed to the reduction of taxes on fuel. The justification is that the collection has shown a real increase, making room for the measure without compromising the achievement of the fiscal target, which allows a gap of up to R$ 170.5 billion.
Technicians from the Ministry of Economy, however, say they were not involved in the negotiations. Officially, the folder said it will not comment on the matter at this time.
The rise in fuel prices has bothered the president, especially in the year he intends to seek reelection. Petrobras’ policy, in turn, follows the market dynamics, reflecting the increase in oil prices and the dollar.
Bolsonaro’s main opponent in polls, former president Luiz Inácio Lula da Silva (PT) has already explored the topic and attacked the company’s pricing policy, saying he would make changes.
Within the government, the topic is treated not only as a sectoral issue, but also as an economic, fiscal and social issue.
Last year, gasoline rose 47.49%, while ethanol rose 62.23%, according to the IBGE (Brazilian Institute of Geography and Statistics).
Diesel was on average 46.04% more expensive. With a shortage of rains, electricity rose 21.21% in 2021.
On Wednesday (19), in an interview with Jovem Pan, Bolsonaro hinted that he was looking for an “alternative source” to reduce fuel taxation.
“I recognize the inflation of food, I recognize the rise in fuel, I talk about why. Out of the air here, there was talk of a proposal that we could send to Congress that deals with fuel. Yes, there is this proposal, I don’t want to go into detail, will be presented at the beginning of the year”, said the president.
“We seek here to reduce the tax burden, often being forced to find an alternative source, you can’t just reduce it from there and we are doing what we can,” added Bolsonaro.
The National Congress summit has also shown concern about the increase in fuel prices.
According to government sources heard by the leaf, the idea of reducing taxes is already pacified within the Executive and is being discussed with the Legislative. The aim is to reduce the burden on fuel, gas and electricity.
The report found that the content of the PEC has already been discussed with the president of the Chamber, Arthur Lira (PP-AL).
Internal government calculations indicate that a reduction of R$ 0.10 in the PIS/Cofins rate on diesel generates an impact of R$ 6 billion per year on revenues. The same reduction for gasoline would have a cost of R$ 3.8 billion per year.
To set all rates to zero, the impacts are estimated at BRL 26 billion for gasoline, BRL 20 billion for diesel and BRL 4 billion for ethanol, according to approximate calculations.
The proposal being discussed within the government may still create a compensation fund to cushion the rise in fuel prices at times of increase in the prices of a barrel of oil and the dollar.
However, this point is still under evaluation, according to government sources participating in the negotiations. The Economy is against the creation of the stabilization fund.
Among technicians in the economic area, the assessment is that measures to change fuel taxation have a small impact on prices and a high impact on revenue.
According to a survey by the ANP (National Petroleum Agency) completed on January 15, the average price of a liter of regular gasoline at the pumps is R$ 6,606. Diesel costs an average of R$5,422, and ethanol, R$5,046.
Even if the tax reduction results in less cents paid by the consumer, nothing prevents the relief from being consumed by subsequent price adjustments.
In addition, the assessment is that a proposal in this sense could further weaken the credibility of fiscal rules, after the president had run over the economic team and decided to change the spending ceiling.
The change in the ceiling, already enacted by the National Congress, paved the way for the payment of Auxílio Brasil of at least R$400, as Bolsonaro wanted. In the economy, the measure resulted in a new stampede of four members of Guedes’ team.
Giving up revenue can also worsen the picture of public accounts, which remain in the red.
On Wednesday (19), the Senate’s IFI (Independent Fiscal Institution) released its new projections, which include a deficit of BRL 106.2 billion for this year, above the BRL 79.4 billion foreseen in the Budget approved by the Congress.
If the government cuts taxes on gasoline and electricity, the deficit is likely to be even greater. However, there is room for this in the fiscal target. The LDO (Budget Guidelines Law) authorizes a negative result of up to BRL 170.5 billion in 2022.
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