Congress approves change in ICMS on fuels text goes to sanction

Congress concluded in the early hours of this Friday (11) the vote on the bill that amends the collection of ICMS (Tax on the Circulation of Goods and Services) on fuels and zeroes the PIS/Cofins rates on diesel and gas until the end. 2022, election year.

The vote came after Petrobras announced a mega-increase in gasoline and diesel prices. Congressmen criticized the measure, which increased pressure for action to stem the effects of the bomb.

In the Chamber, the score was 414 to 3 in favor of the common text in both Houses. By 290 to 128, deputies also decided to suppress two Senate provisions. Now, the project goes to the sanction of President Jair Bolsonaro (PL).

The rapporteur of the text in the Chamber, deputy Dr. Jaziel (PL-CE), decided to suppress two devices that created a trigger for extraordinary readjustment in cases of ICMS tax lag in moments of high or sudden drop in fuel prices.

“If the text aims precisely at giving greater stability to the value of fuels, we see no logic in allowing readjustments in periods shorter than those set precisely when there are relevant variations in these values.”

The PT, which obstructed the vote due to criticism of Petrobras’ pricing policy, ended up in favor of the project.

“We are not saying that we are going to vote against this project, but we do not accept to deceive the Brazilian people,” said PT leader in the Chamber, Reginaldo Lopes (MG). “This government is committed to the financial market, to Petrobras’ speculative shareholders. They are destroying Petrobras,” he pointed out.

The New also obstructed, but under the justification of an empty plenary. “There are 500 deputies missing, president, who cannot speak in this session,” said the party’s leader in the Chamber, Tiago Mitraud (MG).

In the Senate, the basic text was approved by 68 votes to 1, with one abstention, after successive postponements and constant attempts by governors to avoid losses in state revenue. In a vote of highlights, parliamentarians approved the exemption of federal taxes on diesel and gas by 56 votes to 8.

The leader of the MDB in the Senate, Eduardo Braga (AM), said he regretted the adjustment by Petrobras, but said that the project could reduce the 24.9% rise in diesel to “zero impact”. The increase in gasoline would not be directly dampened by the proposal, he conceded.

The change in ICMS is supported by President Jair Bolsonaro, who for months has been wrestling with governors over the blame for the increase in readjustments.

The Chief Executive is concerned about the political effects of rising fuel prices, especially in the year in which he will seek re-election. He is in second place in the polls, behind former president Luiz Inácio Lula da Silva (PT).

While the president accuses the states of profiting from the rise in prices, via ICMS collection, the governors point the finger at the price policy of Petrobras, whose controlling shareholder is the Union.

On different occasions, Bolsonaro and the Minister of Economy, Paulo Guedes, defended a contribution by governors to contain the price of fuel. With support from the Planalto, the federal government will give up a collection of R$ 18 billion to zero PIS/Cofins rates on diesel and gas by the end of the year.

The states, in turn, claim that the measure will not solve the problem and complain about the loss of revenue.

“We want to help lower the price, and they can no longer blame the ICMS”, said the governor of Piauí, Wellington Dias (PT). “We agreed to deal with ICMS on consumption in the tax reform, where ICMS is on fuel and also energy and others. But with the responsibility of offsetting revenues.”

Dias also stated that the bill voted on is unconstitutional and that he will appeal to the Federal Supreme Court (STF). “We will not accept taking money from the people, because public money belongs to our people, to send it to the gambling of speciation and profits like the R$ 103 billion Petrobras distributed to investors, from the poor people to the pockets of the richest”, he highlighted.

According to the text of PLP 11, the states must regulate the creation of a single ICMS rate on fuels within the scope of Confaz (National Council for Finance Policy). In addition, the text provides for a change in the rate model, from a percentage on the value (ad valorem) to a fixed value on the liter (ad rem).

The single rate must be applied to gasoline, diesel, ethanol and cooking gas. Initially, it would also be valid for aviation kerosene, but the deputies excluded the possibility. Although unified among the states, the charges may be differentiated by type of fuel, according to the text.

While this is not implemented by the governors, the tax on diesel and biodiesel will have to be levied on a defined calculation basis, obtained by the moving average of the last five years.

The rule, treated as a transition, would be in effect until December 31, 2022. In practice, the text forces an immediate change in the tax.

The governors tried to enact an amendment that would freeze the weighted average price on which the ICMS on fuels is calculated — the calculation basis has been fixed since November 1, 2021.

The articulation was one of the reasons behind the postponement of the vote, previously scheduled for Wednesday (9). But the rapporteur, Senator Jean Paul Prates (PT-RN), said that the amendment would result in an even worse solution for the states.

“I’ve come to the conclusion that it’s worse for them, because [o congelamento do preço de referência] it’s about all derivatives and lubricants. The other [regra] it’s just about diesel, so let’s leave it as it was, 60 months, which is the agreement we have with the Presidency [do Senado]”, he said.

The vote on the bill that changes fuel taxes is the economy’s bet to try to appease the growing pressure for direct subsidies to reduce fuel prices. The folder commanded by Guedes tries to minimize damage and resists the measure.

This week, the political wing of the government and Petrobras itself defended to President Jair Bolsonaro the creation of a subsidy for diesel, along the lines of what was done during the Michel Temer (MDB) government in 2018, during the truck drivers’ strike.

Internal government scenarios point to a cost of R$ 27 billion to fully fund the current lag in diesel prices for another three months. The amount would have to be passed on through extraordinary credit, which is outside the spending ceiling – a scenario that Guedes wants to avoid at all costs.

On the other hand, in Palácio do Planalto, the assessment is that the approval of the project in the Senate does not remove the need to implement subsidies to reduce the price at the pump more quickly. Therefore, this hypothesis remains strong in the political wing, which credits Guedes with the fact that an action in this sense has not yet come to fruition.

The expectation of technicians in the economic area was that there would be some relief in the prices of the dollar and oil, which accelerated in the wake of the invasion of Ukraine by Russia. The announcement of the adjustment by Petrobras, however, ended up maintaining the high pressure for subsidies.

The increase was criticized on the Senate floor. “We are doing just the opposite. The opposition, the PT, the Senate are working. Petrobras is increasing fuel”, said the rapporteur Jean Paul Prates.

“The announcement had negative repercussions”, said senator Rose de Freitas (MDB-ES).

In order to get the bill passed, the Economy had to accept an agreement with the bench of parliamentarians from Amazonas to undo part of the cut in the rates of IPI (Tax on Industrialized Products).

The federal government will reissue the decree that made a linear reduction of 25% in the tax, leaving out products from the Manaus Free Trade Zone, which are already exempt and lose competitiveness with the IPI cut.

Earlier, also in the Senate, a bill was approved that creates a stabilization account to cushion readjustments and establishes guidelines for a new national pricing policy. The bill, however, was not placed on the Chamber’s agenda.

The text also doubles the scope of Auxílio Gás, paid to beneficiaries of Auxílio Brasil, and creates a gasoline allowance worth R$300 per month for taxi drivers, app drivers and delivery people. Drivers qualified to drive mopeds or motorcycles up to 125 cc would receive a lower value of R$100.

According to the proposal, the new fuel price policy must observe guidelines such as reducing the volatility of domestic prices and providing for a frequency for the announcement of readjustments.

An account filled with excess dividends paid by Petrobras and income from royalties and special participations would be used to compensate producers and importers whenever the market price is above the reference price stipulated in the policy – ​​thus, the increase would not be passed on to the pumps. .

The Ministry of Economy criticizes the stabilization bill because it imposes on the Union the cost of paying the bill to contain fuel prices – unlike the ICMS text, which was supported by the government.

The technicians also consider that the mechanism has low efficiency, since the fuel market is large, and its members can more quickly pass on readjustments given the certainty that the government will pay the difference.

Economic sources also see a risk to the spending ceiling, the government’s main fiscal anchor. To make disbursements from the stabilization account, the government might have to circumvent the ceiling.

The creation of benefits, on the other hand, may come up against the electoral law, which prohibits the creation of new social policies in an election year. The rapporteur acknowledged that the measure that the new aid can be implemented only in 2023.

The proposal for the stabilization account and benefits also needs to go through the Chamber, but it should have a slower process, since the text originated in the Senate and is unprecedented in the eyes of the deputies.

UNDERSTAND FUEL PROPOSALS

PLP 11/2020

What provides:

• Adoption of a single ICMS rate on fuel, with a fixed charge per liter (today, the charge is a percentage of the price);

• Until the regulation of the new rule, states are obliged to charge ICMS on diesel on a calculation basis that results from the average price over the last five years;

• PIS/Cofins rates on diesel and gas will be zero until the end of 2022 (waiver of R$ 18 billion).

PL 1472/2021

What provides:

• Creates a national fuel price policy, with variation bands and defined readjustment frequency;

• A stabilization account supplied with dividends paid by Petrobras to the Federal Government and revenues from oil royalties and special participations would provide compensation for the difference between the market price (following international quotations) and the reference price;

• It expands the Auxílio Gás, to at least 11 million families (today, the benefit is paid to 5.5 million beneficiaries of Auxílio Brasil).

• Creates an aid of R$ 300 for taxi drivers, app drivers and small boat pilots who have a family income of up to three minimum wages. Drivers qualified to drive mopeds or motorcycles of up to 125 cc would receive a lower amount of R$100.