States approve freezing of ICMS on fuels

The state finance secretaries confirmed this Thursday (27) the extension of the freezing of ICMS (Tax on the Circulation of Goods and Services) on fuel for another 60 days, until March 31.

The measure was ratified at an extraordinary meeting of Confaz (Finance Policy Committee), which is made up of state and Federal District secretaries and representatives of the Ministry of Economy.

The states’ decision was unanimous. The announcement was accompanied by charges to the federal government, so that it also adopts measures to contain the price of fuel.

“The governors defend, however, that structural solutions be created to stabilize fuel prices, such as a price equalization fund,” the statement said.

The secretaries, through Comsefaz (National Committee of Secretaries of Finance), claim that just freezing the ICMS “is not enough” to prevent price readjustments.

According to them, the increases are driven by other factors, such as variations in the dollar and Petrobras’ pricing policy, which follows fluctuations in the price of a barrel of oil on the international market.

The market itself already expects new readjustments, given the escalation of international oil prices and the high lags in relation to abroad.

“Comsefaz supports the creation of the equalization fund as a way of preventing the readjustments of the barrel of oil in the international market from being passed on to the final price of fuels, as has happened, generating frequent increases”, says the note.

The stabilization fund would be a mechanism to directly attack price increases, as a kind of buffer for these fluctuations. The funds would be used to cover the cost of an increase not passed on to consumers.

The creation of this fund has supporters within the government, but also opponents. The economic team is against it, considering the mechanism to interfere with prices.

In addition, technicians argue that, as the fuel market is very large, such a fund would be very expensive, and the results in price would be minimal. Companies could widen the increases or their profit margins, betting that the government would do everything to contain the increases for consumers.

So far, what is being discussed in the government is a PEC (proposed amendment to the Constitution) to allow the temporary reduction of taxes on diesel, gasoline, ethanol, gas and electric energy.

The rate cut would be done without the need to compensate for the loss of revenue, trampling the LRF (Fiscal Responsibility Law).

as showed the leaf, the government also wants to include in the PEC an authorization for governors to cut ICMS on fuel and energy.

The inclusion of this device is a way of putting pressure on governors, with whom Bolsonaro has been fighting a long and intense battle over alleged guilt for the increase in the price of gasoline, diesel and ethanol.

The Chief Executive argues that the governors do not accept giving up the ICMS tax on fuel and that this is a determining factor for the price at pumps to remain high.

Since the discussions became public, governors opposed to the government have privately expressed concern about the risk that the PEC could end up unbalancing state accounts. Despite the recent increase in collections, a cut in ICMS rates would have a significant impact on revenues.

In this scenario, the governors reversed their initial intention to decree the end of the tax freeze, which began in November 2021 and was expected to end at the end of this month.

Amid public pressure, the governors announced on Wednesday (26) their intention to maintain the freeze on ICMS on fuel for another 60 days, as shown by the Panel. The decision was ratified today at Confaz.

The freezing is done by maintaining the so-called PMPF (Weighted Average Price to Final Consumer) at the levels in force on November 1, 2021.