Government goes to STF to guarantee ICMS reduction on diesel

The government appealed to the STF (Supreme Federal Court) to try to guarantee the reduction of ICMS on diesel oil provided for in a law passed by Congress in March, but the target of maneuver by the states to maintain the collection.

The price of fuel was readjusted again at Petrobras refineries earlier this week, generating new threats of strikes by truck drivers and culminating in the resignation of Minister of Mines and Energy Bento Albuquerque.

In the action, the AGU (Advocacy General of the Union) questions disrespect for the law that established a single ICMS rate for all states, in reais per liter, charged only at the production stage.

The law provided for a transition period, until the end of the year, in which states should set a rate equivalent to the average of the last 60 months, which would represent a drop in the current tax burden on fuel.

But, in a meeting at the end of March, Confaz (National Council for Finance Policy) decided to establish a single rate of R$ 1.006 per liter, but allowing each state to give a discount to reach its current rate.

In practice, therefore, there was no change in the amount charged by state governments.

The law has always been questioned by the states, on the grounds that the government would be interfering with state laws and that the unification of ICMS would represent an increase in the tax burden in some states and a reduction in others.

The government and the fuel sector argue that the model reduces tax complexity and the risk of fraud with the interstate sale of products.

The maneuver by the states had already been criticized by the president of the Senate, Rodrigo Pacheco (PSD-MG). This Thursday, in his weekly live, President Jair Bolsonaro (PL) said that the government would go to court to try to lower fuel prices.

The simple adoption of the unified ICMS does not reduce prices, which would depend on the adopted rate. But the government is counting on the transition period, in which the rates would fall in relation to the current ones.

“The uniformization of rates is another fundamental measure to make fuels less susceptible to conjunctural fluctuations, to improve transparency and predictability in the price of these inputs”, says the AGU, in the action.

“Of course, when proposing a single value, it is up to entities with regulatory capacity to evaluate a solution capable of meeting this new dynamic, without disproportionately harming any of the Brazilian States, and without harming consumers, who suffer greatly from the rise in prices. “

The AGU asks for an injunction to suspend the Confaz covenant clauses that allow the discount on the maximum rate, which the states called the “equalization factor”.

The IBP (Instituto Brasileiro de Petróleo e Gás), which represents the country’s fuel distributors, released a note also defending the demand for respect for the text approved in Congress.

“By disfiguring the single-phase collection, the Agreement signals the maintenance of the current tax complexity, which stimulates the illegal market, and the competitive imbalance in the segment, which drives away investments,” he said.