Rapporteur in the Senate wants a single ICMS rate on diesel, but optional

Rapporteur of two projects that seek to lower fuel prices, Senator Jean Paul Prates (PT-RN) wants to propose to the institution a uniform rate of ICMS (Tax on Circulation of Goods and Services) on diesel, but its adoption would be optional for governors.

The changes were indicated by the rapporteur in a document sent to leaders on Sunday night (13) and obtained by the leaf. Details will be presented at a meeting on Monday (14).

The text approved by the Chamber of Deputies adopted the change in an imposing manner and with a broad scope for all fuels, including gasoline. The measure was supported by the Ministry of Economy, but criticized by the governors.

Today, charging ICMS on fuels is done by applying a percentage to the price (a mechanism called “ad valorem”). In moments of high in the amounts charged, the states observe an increase in the collection.

The project changes this system to a fixed charge per liter of fuel (the so-called “ad rem” system), as is already the case with the collection of federal taxes on fuel.

The approval of the text had been articulated by the Jair Bolsonaro government itself (PL), in an attempt to contain the increase in fuel prices. The governors, in turn, argue that the change in ICMS is not a determining factor for prices.

In his opinion, Prates makes the change optional, that is, states will be able to determine whether the rates will be charged on the price or per liter purchased. In addition, the changes will apply only to diesel – and, consequently, to biodiesel.

The senator explained to leaf who decided to initially link the measures to diesel in his report because it is the most impacting issue at the moment and because its rate is less variable between states. However, he says that, if successful, he can expand to other fuels and cooking gas.

“Each state will compete, and to them collectively also via Confaz [Conselho Nacional de Política Fazendária], define exactly the rates and terms of application. This cannot be done by a complementary law of Congress on top of the state dimension”, explained the senator.

For him, it would also be unconstitutional to include in the law what should be the basis of calculation for the definition of the fixed rate on the liter. Therefore, this point can also be defined by the states.

“We are working on an effective mechanism, but it is a toolbox placed on the governor’s desk so that he can act,” he said.

According to the text passed on to the leaders, the regulation would allow the application of the so-called single-phase ICMS, that is, uniform throughout the national territory and charged only once. The rates could, however, be differentiated by product. The states would also be authorized to reduce them, with provision for re-establishment in the same year.

According to Prates, any changes would not be implemented immediately and would depend on Confaz regulation, in order to avoid abuse or legal uncertainty. The PT senator also said that the ideal would be for all states to adopt uniform taxation, but he recognizes the difficulties for this to happen.

“It is a proposal built and discussed with the states. That said, the option for diesel as the initial fuel of the tax transition is due precisely because its rates are less varied between states, generating less distortion with the uniform rate”, he explained.

The senator also foresees in his text the possibility of creating a clearing house by the states and the Federal District, in order to mitigate any losses caused by the new rates in their budgets.

Jean Paul Prates did not include, at first, the possibility of cutting federal taxes on diesel. But the senator left the door open to accept amendments presented by parliamentarians or groups allied with the government. as he showed the leafthis point has been the subject of negotiation with the Ministry of Economy.

Over the weekend, in an interview with a radio station in Rio de Janeiro, Bolsonaro mentioned another proposal that deals with fuels, the PEC (Proposed Amendment to the Constitution) presented in the Chamber of Deputies, which provides for the possibility of zeroing federal tax rates on the diesel. The chief executive said he would adopt this measure once the proposal is approved.

Prates decided not to include in his text the expansion of subsidies, which have become the subject of great controversy recently. However, he is open to evaluating amendments in this sense presented by senators and he welcomes them.

Another PEC on fuel, this one authored by Senator Carlos Fávaro (PSD-MT), provides for the reduction of fuel taxes and the payment of diesel aid to truck drivers, gas aid to a greater number of families and subsidies to bus fares urban. Its high cost led the economic team to nickname it “PEC Kamikaze”.

Jean Paul Prates says he will evaluate possible amendments proposing subsidies. He said that transfers to pay for free public transport, such as for the elderly, would not face resistance. The expansion of the gas allowance also has his sympathy, but, on the other hand, subsidies for self-employed truck drivers would be considered ineffective, according to he heard from representatives of the sector.

Regarding the changes in ICMS on fuel, the PT senator decided to send an entire chapter to Senator Roberto Rocha (PSDB-MA), rapporteur of PEC 110, on tax reform, which is being processed in the Senate. For the PT, the changes, if incorporated into the opinion, could propose changes in the state tax in a more incisive way, including for a uniform tariff and the adoption of a fixed rate on the liter.

Another project on the report by Jean Paul Prates has as its main point the creation of a compensation account with resources to be used to reduce the impact of high fuel prices.

This proposal has already been approved by the CAE (Commission on Economic Affairs) of the Senate and should go to the plenary session together with the other bill.

Prates estimates that the account will have resources in the order of R$ 25 billion by the end of this year. This amount would be responsible for reducing R$ 0.50 per liter of fuel at the origin of the product and, according to some evaluations, it can reach R$ 2 or R$ 3 in the price of the pump at the gas stations.

The project provides for six sources of revenue for the compensation account, mainly from extraordinary profits that the government has earned as a result of the rise in the dollar. Petrobras dividends, royalties from government participation in the oil sector and foreign exchange reserve surplus are listed.

This project will be presented to the bench leaders as it was approved by the CAE. However, it may change once it is forwarded to the plenary and a new period for receiving amendments is opened.

On Friday (11), the PT senator held a meeting with the party’s pre-candidate for the Planalto, former president Luiz Inácio Lula da Silva. Prates said that the meeting served to explain to Lula the fuel issue and the solutions that are being presented – the project that provides for the compensation account is authored by another PT senator, Rogério Carvalho (PT-SE) – and not necessarily to hear guidance on the issue.