Planalto dribbles Guedes and delivers to deputy PEC with fuel tax cut

The Palácio do Planalto drew up a PEC (proposed amendment to the Constitution) that allows for a broader reduction in fuel taxes than what was agreed with Minister Paulo Guedes (Economy) and handed it to a deputy from the base to be filed in the Chamber. .

The text was written by an employee of the Civil House, the deputy deputy head of Public Finance, Oliveira Alves Pereira Filho, as can be identified in the document’s properties.

The proposal was filed by Deputy Christino Áureo (PP-RJ), who now collects the 171 signatures necessary for it to be processed in the House.

An ally of the Jair Bolsonaro government (PL) and a co-religionist of the Minister of the Civil House, Ciro Nogueira, Áureo proposed a broader text, covering diesel, gasoline, ethanol and cooking gas. Guedes advocated lowering the tax only on diesel.

The PEC says that the Union, states and municipalities will be able to zero or partially reduce tax rates levied on fuel and gas, “as a result of the social and economic consequences of the Covid-19 pandemic”.

This means that the text also allows states to cut the ICMS (Tax on Circulation of Goods and Services) on fuels.

as showed the leafthe government wanted to include the ICMS cut in the PEC as a way of putting pressure on governors, with whom Bolsonaro is fighting a dispute over who would be to blame for the rise in prices.

The measures could be adopted in 2022 and 2023 and would not need to meet the requirements of the LRF (Fiscal Responsibility Law), which provides for the need to raise other taxes to compensate for the loss of revenue.

The proposal also allows for the cutting of taxes of an “extrafiscal nature”, which includes IPI (Tax on Industrialized Products), IOF (Tax on Financial Operations) and Cide (Contribution for Intervention in the Economic Domain).

The PEC has been under discussion for at least six months in the government, but it took palace aides, congressional leaders and members of the economic team by surprise.

Despite this, the text has the approval of the Planalto and the president of the Chamber, Arthur Lira (PP-AL). The initial expectation was that the proposal would be presented by the Senate, led by Rodrigo Pacheco (PSD-MG), pre-candidate for president.

Members of Guedes’ team were upset by the fact that the text had been prepared by the Civil House. They classify the proposal as madness, surreal and something that could set the economy on fire.

The impact could reach R$ 54 billion for the Union, according to internal government calculations. With the cut in diesel taxes, for example, the impact would be R$ 17 billion.

For Guedes’ team, the text leads to the perception of a worsening in public accounts, which, in turn, can boost dollar and interest rates, making recovery difficult and accelerating inflation. A source said privately that if the PEC is approved, it could worsen the country’s economic situation.

The assessment among technicians is that the cut in fuel taxes can quickly be annulled by new adjustments by Petrobras, whose policy follows international market prices.

Without any reduction in taxes, the government already foresees a deficit of R$ 79.3 billion this year. The country has accumulated successive deficits since 2014. For this year, the LDO (Budget Guidelines Law) authorizes a negative result of up to R$ 170.5 billion.

The text does not include so far the possibility of cutting taxes on electricity, which would raise the impact to R$ 75 billion.

Already members of the political wing had been complaining for months about the intransigence of the economic team. According to reports, despite the president’s priority orientation, at every moment the economy came up with a new snag.

The episode is a new chapter in the dispute between the political and economic wings of the government, which has dragged on since the beginning of the Bolsonaro administration.

Within the government itself, there are advocates of more aggressive measures to lower fuel prices by force, which boosted inflation in 2021 and should continue to put pressure on consumers’ pockets in an election year.

Palace assistants tend to condition an eventual improvement in the performance of the representative in the polls, now behind Luiz Inácio Lula da Silva (PT), to the improvement in living conditions, including the drop in the price of fuel.

This week, Bolsonaro made an appeal for the approval of the measure.

“I now ask the parliamentarians here for help. No one is going to do anything barbarity, but I want them to give me the powers to eliminate the tax on diesel – on cooking gas we have already zeroed – to face these challenges,” Bolsonaro said during a ceremony at the Planalto Palace.

For the first time, last week, the ANP (National Oil, Gas and Biofuels Agency) price survey detected gasoline being sold at more than R$8 per litre.

The proposed PEC will compete with other proposals already in the Senate.

On Tuesday night (1st), Pacheco met with Lira to discuss the proposals in progress. However, there has not yet been a definition on which one will gain preference.

Lira publicly charged Pacheco and the Senate during the parliamentary recess, as the House had shelved a proposal approved in the Chamber to try to change the way of charging ICMS.

A leader close to Pacheco says that Tuesday’s meeting served to explain changes that should be promoted in the text coming from the Chamber.

In a meeting of bench leaders this Thursday (3), there was no definition on the fuel issue. A new meeting, specifically to address this issue, will be held next week.

The rapporteur of the proposals in the Senate, Jean Paul Prates (PT-RN), says that one of the texts under his care will contain measures to reduce taxes on diesel – initially it would only be for this fuel.

One of the proposals already ready for a vote in plenary, after being approved by the CAE (Commission on Economic Affairs), still provides for the creation of a source of funding for a kind of fund to be used to stabilize prices. The resources would come through a tax on the export of oil and derivatives.

Prates explained to the president of the Senate that the fund format can incur a defect of origin, because only the Executive can legally create these mechanisms. So it works in an alternative way, which will just be a clearing account to raise these resources.

Another congressman who intends to present a proposal to reduce the price of fuel is the recently sworn in senator Alexandre Silveira (PSD-MG), who was even invited to lead the government in the Senate, but should not accept.

Silveira defends positions considered more radical by the economic team.

“I am studying in a very deep way a PEC that has a bolder conception than the PEC that only authorizes the reduction of taxes by the Union, states and municipalities”, he said on Wednesday (2), after the your possession.

Silveira has said that the difficulties in approving a dehydrated or more daring PEC would be the same. Therefore, he also wants to invest in the idea of ​​a price stabilization fund.

The difference is that the Minas Gerais senator defends the use of Petrobras dividends for this purpose. Furthermore, the funds would not only be used to insure the value of diesel, but also other energy sources.

“On the PEC, I understand that only the reduction of taxes or even the exemption of taxes is not enough to contain the balance of the high oil that comes from abroad compressing Brazil”, he said.

“What can be done now is the optimization of Petrobras’ dividends, to finance the balance of fuel prices in Brazil, diesel oil, gas and electric energy”, he added.

Until then, Silveira would present the proposal for the government, but the Planalto ended up inviting deputy Christino Aureo (PP-RJ) to protocol the government’s text.