Government publishes provisional measure to correct sanctioned law that gave credit for unpaid tax

The federal government will publish this Wednesday (18) a provisional measure to correct a mistake in the law that exempted federal taxes on diesel, biodiesel, cooking gas and aviation kerosene.

The legislation sanctioned without vetoes by President Jair Bolsonaro (PL) in March contained a risk to the public coffers that could lead the Executive to exceed its forecast of loss of revenue with the tax waiver.

Conform showed the Sheetthe wording of the rule granted to companies that buy fuel for their own use tax credits, which could be used to deduct amounts of other taxes owed by them to the Federal Revenue — even if they do not pay any PIS and Cofins in these operations due to the exemption .

That is, the text not only zeroed PIS and Cofins on fuels, but also generated a tax credit for those who buy the products. Therefore, the fiscal impact could be greater than announced.

The advice of the General Secretariat of the Presidency of the Republic announced that a change in the law will be published in the Official Gazette this Wednesday to avoid this loss of revenue.

The legislation gave scope for a wide range of companies, such as transport companies, bus companies and aviation companies, to benefit. A part of these segments make up the president’s support base and also have the sympathy of parliamentarians in the National Congress.

The Ministry of Economy had announced that the cut of PIS and Cofins would take R$ 14.9 billion from public coffers this year. There is also an impact of BRL 1.66 billion that will fall on the 2023 accounts, when the taxes actually generated in December this year would be collected.

With this, the total waiver of the measure is estimated at R$ 16.6 billion. The value, however, only considered the reduction to zero of the rates, without taking into account the use of the credits that will be generated to the buyers.

Since the time when the law was enacted, technicians warned that the mechanism created by the norm made no sense, since the final purchaser of the products could not be entitled to these credits – especially if the taxes are zero.

This wing of the government argued that the mechanism should be restricted to producing and selling companies that are part of the fuel chain.

The president was in a hurry to sign the law into law because, the day before, Petrobras had announced a mega-increase in the prices of gasoline, diesel and cooking gas. Cutting taxes would be a way to soften the impact of the bombs and mitigate the political consequences in the year in which Bolsonaro intends to seek reelection.

On the Friday that the law was sanctioned, technicians from the Economy and Palácio do Planalto rushed to produce the technical notes and documents necessary for the sanction. Bolsonaro could have vetoed the law in its entirety or some of its parts, but the decision was for full sanction.

The construction of the article that opened the tax credits loophole, however, made a partial veto difficult. The provision included in the same sentence the exemption of PIS/Cofins and the benefit to final buyers, making it impossible to separate the effects.

The passage seen as problematic by the government was incorporated by the rapporteur, Senator Jean Paul Prates (PT-RN), for the first time in the opinion given on March 9, the eve of the vote in the Senate plenary.

Through his advice, the rapporteur highlighted at the time that the text was built in negotiation with Congress and that it was the government itself that asked for the inclusion of the exemption in the proposal.

“The Ministry of Economy had several opportunities to identify problems in the text, and several other passages were adapted in favor of the agreement. The fact that the passage in question was not vetoed indicates that the risk in question was not considered relevant by the Executive Branch itself” , said Prates.