New version of tax reform in the Senate provides for a special regime for fuels

The new version of the tax reform under discussion in the Senate establishes a special regime for the fuel market. The text provides for the collection of taxes per fixed unit of measure (per litre, for example) and uniform rates in the country, in addition to bringing guarantees to protect state and municipal revenues for 20 years.

The proposal’s rapporteur, Senator Roberto Rocha (PSDB-MA), says that the text rationalizes the sector’s taxation model and also protects the finances of governors and mayors. For him, the model represents a solution to the debate about charging ICMS (Tax on the Circulation of Goods and Services) on fuels.

The differentiated regime will apply to fuels and lubricants and provides for the possibility of a single-phase incidence of the tax (ie, only once in the chain). The text opens the way for uniform rates throughout the national territory (ending the tax war between entities), for charging per unit of measure (instead of the price charged at pumps) and the granting of tax credits.

“The proposed model represents a definitive solution to the debate currently underway on how to charge ICMS on fuel, without, however, negatively affecting state and municipal finances”, says Rocha in his proposal. “This model closes loopholes for evasion, without creating cumulativeness”, he adds.

The issue of fuel tax has become a point of discussion in the National Congress, at a time when high prices are impacting inflation. The senators can vote this Wednesday on a proposal that changes the ICMS rules for diesel and biodiesel.

The text of PEC (Proposed Amendment to the Constitution) 110 provides for mergers of existing taxes today.

The federal taxes PIS and Confins would be merged into a new one, called CBS. On the other hand, the IBS would also be created, the result of the unification of the state ICMS (Tax on the Circulation of Goods and Services) with the municipal ISS.

The initial proposal provided for a 20-year transition period for the transition of IBS from source to destination. The deadline has now passed to 40 years, with two 20-year steps.

The concern of governors and mayors is the loss of revenue with the set of changes.

Rocha’s text provides guarantees for each federative entity to maintain the value of its current income, adjusted for inflation, for two decades. “For twenty years all entities will have guaranteed, at least, their current income (considered the municipal share), corrected for inflation”, he says.

The first stage will maintain a mechanism to avoid revenue losses in, therefore, a portion of the IBS revenue will be distributed so that each federation unit can maintain the value of its current revenue, with the correction for inflation. The amount of revenue that exceeds what is necessary to maintain the real revenue of each entity will be distributed by destination.

In particular, the proposed model represents a definitive solution to the debate currently underway on how to charge ICMS on fuel, without, however, negatively affecting state and municipal finances, since the impact of the change on the revenues of States and Municipalities is diluted in 40 years due to the transition in the federative distribution of the revenue that appears in the current substitute.

“After more than two years of extensive dialogue and maturing, I hope that the National Congress will approve this PEC in the form of the substitute that we are presenting. However, it is important to remember that the transformation of this PEC into a constitutional amendment is just the first step in a series of legislative changes that will have to be made. The PEC creates the constitutional basis that will allow the approval of the IBS, by complementary law, and of the CBS and the IS (Selective Tax), by ordinary law”, said the rapporteur.

The new text also gives priority to the allocation of resources from the Regional Development Fund (FDR) to compensate for the loss of competitiveness of companies that will lose ICMS incentives, which will end in the final deadline of 2032. The changes please the industry .

The new version of the report was read this Wednesday (23) at the CCJ (Committee on Constitution and Justice) of the Senate, initiating its processing in the Legislative House. However, there was a request for views and therefore the matter will be voted on only after Carnival.

The previous proposal had only been publicly presented in October last year. However, the process had not started.

Despite resistance to a broad reform, some bench leaders and the president of the Senate, Rodrigo Pacheco (PSD-MG), intend to take the text to a vote in the plenary after Carnival. Pacheco has stated that he intends to pass the tax reform as a legacy of his administration.

The proposal has already been approved by the Chamber of Deputies. However, if Rocha’s text is approved by the senators, it will need to go through a new vote in the neighboring Legislative House, as it has undergone changes.

After reading the report, the National Confederation of Municipalities released a note in support of PEC 110. The entity also argues that few municipalities will suffer from a drop in revenue and that the changes will benefit in particular the poorest cities.

“It is important to clarify that, contrary to what some sectors claim, it is not true that the reform only benefits small municipalities. CNM estimates indicate that more than 99% of the poorest municipalities will benefit from the reform. , a group with a large population and low revenue, the percentage that wins is 95%. In a comparison without considering any transition rule, 762 Municipalities would reduce their participation in the tax cake”, says an excerpt from the note.