Fuel PEC is populist and electoral, say tax experts

The attempt by the Jair Bolsonaro (PL) government to temporarily cut taxes on fuel and electricity, which should also include state taxes, was met with concern by tax experts.

In the opinion of specialists, the PEC (Proposed Amendment to the Constitution) for fuels, which is being prepared, is an “electoral”, “populist” and irresponsible measure from a fiscal point of view – in addition to not solving the main issue that currently weighs on the fuel prices: Petrobras’ pricing policy.

For Rafael Korff Wagner, a partner at Lippert Advogados and president of the IET (Instituto de Estudos Tributários), it was clear, with the freezing of ICMS (Tax on Circulation of Goods and Services) prices made by the governors and which ends on January 31 , that fuel prices are much more linked to the volatility of the dollar and prices in the international market than to the price of taxes levied on fuels.

Last week, the secretaries of Comsefaz (National Committee of Secretaries of Finance of the States and DF) decided to end the freezing of ICMS on fuels.

The end of the freeze is yet another chapter in Bolsonaro’s dispute with governors. According to the president, the state tax was the culprit for fuel inflation, which was rejected by the governors.

According to the president of the IET, however, fuel prices are much more linked to the volatility of the dollar and prices on the international market than to the price of taxes levied on fuel.

“This attempt by the government to change the Constitution is unlikely to be approved by the National Congress, given that it would remove an excessively high amount of revenue from the states. The Union has a greater margin to compensate for the drop in revenue, but the states would not be able to compensate for this value.”

He also assesses that the measure proposed by the president seems “populist” and “electoral”.

The PEC is another step in the lack of control over public spending, now through the waiver of revenue, assesses tax expert Breno Vasconcelos, a partner at Mannrich e Vasconcelos​.

“In addition to the limits of electoral legislation to the granting of benefits in an election year, a constitutional article and one in the Fiscal Responsibility Law guarantee the balance of public accounts by requiring that waivers be accompanied by an estimate of the financial impact or compensation measures.”

Vasconcelos adds that, from a legal point of view, the Bolsonaro government’s proposal also sets a worrying precedent for the sustainability of the Budget.

João Eloi Olenike, executive president of the IBPT (Brazilian Institute of Planning and Taxation), agrees that the proposed amendment to the Constitution would hardly be approved by both Houses, since most deputies and senators maintain a close political relationship with the governors of their states. .

“The government may be shooting itself in the foot, by putting into a PEC a measure that reduces the collection of states, depending on congressional approval. They will not want to reduce collection without a counterpart.”

Olenike also says he believes that if the measure only contemplated federal taxes, they could even approve it, but putting ICMS in history could make the PEC as a whole fall.

“The fact that we are in an election year also weighs. If we think that the government has decided to act only now, because of the elections, it can have a negative effect. .”

He adds that the main measure for the population to be less sacrificed with the increase in fuel would be to modify Petrobras’ pricing policy, a government responsibility.

“This policy of parity of international prices makes the increases expressive. Wouldn’t there be an alternative for the fuel not to go up so much and without leaving Petrobras at a loss?”, asks Olenike.

Fuels have weighed on the consumer’s pocket. Last year, ethanol was the item of the IPCA (the country’s official inflation) that accumulated the highest increase, 62.23%. Gasoline rose 47.49%; diesel oil, 46.04%.​

“This is a lateral and electoral attempt to solve the problem that lies elsewhere, namely, Petrobras’ pricing policy”, evaluates Fernando Facury Scaff, professor of financial law at USP (University of São Paulo). “This proposal may even contribute to the solution of the problem, but it will not attack it directly.”

Scaff also points out that the reduction of taxes to zero does not even need a law to be made – as has happened before. “The creation of a fund does not require constitutional modification, and can be done by ordinary law. Amending the Constitution for this, therefore, is an electoral maneuver.”