The injunction obtained by the federal government against the states’ maneuver to regulate the new fuel ICMS law became the center of the new tug of war between the Union and governors on the subject.
On the one hand, state governments and fuel distributors warn that the judicial decision to suspend the application of discounts applied by states on the maximum rate of R$ 1.006 on diesel may have the opposite effect to what is desired, raising the price of fuel at the pumps.
On the other hand, the federal government wants to use the decision to force a change in the Confaz (National Council for Finance Policy) agreement that established the uniform rate. The Ministry of Economy, which chairs the collegiate, convened an extraordinary meeting for this Thursday (19) to discuss the issue with the states.
Granted by Minister André Mendonça, of the STF (Federal Supreme Court), last Friday (13), the injunction generated a confusion of interpretations that so far has only not evolved into an operational difficulty because the new rates come into effect only on the 1st. July, when the ICMS freeze started in September 2021 ends.
Mendonça overturned the so-called “equalization factor”, which allowed states to give discounts on the maximum rate of R$ 1.006 per liter established in a Confaz agreement. Thus, states and industry executives understand that this will be the single rate.
The decision responded to a request from the AGU (Advocacy-General of the Union), which asked the STF to suspend only the adjustment factors, but not the rate itself.
As most states practice lower values, the adoption of this rate would represent an increase in the average tax burden on fuel, which last week broke a historic record when it reached an average price of R$ 6.847 per liter.
In São Paulo, for example, the discount rate would be R$ 0.6597 per liter, equivalent to that charged today in the state. Thus, the use of the maximum rate provided for in the agreement would represent an increase of R$ 0.3463 per liter.
Comsefaz (National Committee of Secretaries of Finance, Finance, Revenue or Taxation of the States and the Federal District) estimates, in a technical note, that the average high may exceed R$ 0.20 per liter in some regions, if the decision is maintained. .
According to government officials, the AGU was warned about the risk of asking for the suspension of discounts only, without questioning the rate. However, the government’s legal body understands that Minister André Mendonça’s decision leads the states to re-discuss the agreement.
According to sources familiar with the discussions, the intention of the Economy is for state governments to replace the maximum rate of R$ 1.006 per liter of diesel with an ad valorem rate (percentage of the price) calculated on the average of the prices of the last 60 months.
This is exactly the transition rule included by Congress to take effect in 2022, if states had not streamlined the regulation of the law.
Representatives of the states claim that there is no longer any point in talking about a transition period, as Confaz has already published an agreement with the definitive rules for the sector. The text says that the average would be applied “as long as the incidence of ICMS is not disciplined under the terms of this law”.
If there is no advance, the AGU is also being advised to amend the request made to the STF to include the suspension of the rate itself.
State governments have always resisted the unification of ICMS, as provided for by law, claiming that the measure represents a loss of revenue in states that have a higher rate at the same time that it increases fuel prices in those with a lower tax burden.
In an effort to try to contain the rise in prices, however, the Jair Bolsonaro government (PL) sponsored the debate in Congress, including the transition clause, which would have an immediate effect on prices by reducing the tax burden to the average of the last 60 months. .
The equalization factor was the solution found by the states to avoid the unification of rates, establishing an amount equivalent to the most expensive ICMS in Brazil, charged in Acre, and freeing the Treasury departments to grant discounts.
Under the new rule, the ICMS is now charged in reais per liter, instead of a percentage rate on a reference price calculated by the finance departments, as it is today. It also starts to be charged only at the producer, and no longer at all stages of the chain.
The change has long been defended by the fuel sector, which sees the simplification of ICMS as a reinforcement in the fight against tax fraud, such as the sale in other states of products purchased with cheaper tax.
Supporter of the change in ICMS, the IBP (Brazilian Institute of Oil and Gas) believes that the adoption of the highest rate by the states contradicts an article in the law that prevents an increase in the average tax burden on fuel.
“We have to read the law as a whole”, says the director of Downstream at IBP, Valéria Lima, citing paragraph 5 of article 6, which determines “that there is no increase in the proportional weight of the tax in the formation of prices”.
According to her, the average rate on diesel today is R$ 0.69 per liter. Lima questions the states’ resistance to adopting the 60-month average established by law, claiming that the federal government has already made its contribution by zeroing PIS/Cofins rates on diesel.
“The states have been partners in the increase in fuels”, he says, noting that the collection of ICMS on these products rose 41% in the first quarter. The IBP calculates that, with the average rate of 60 months, equivalent to R$ 0.61 per liter, the increase would have been 6%.
The AGU itself asked Mendonça to also respect the clause in the law that prevents the increase in the average tax burden on fuel, which the states say is unfeasible without the equalization factor.
In a technical note on the injunction, Comsefaz says that the average increase in ICMS on diesel “is not intended by any State or the Federal District [Distrito Federal]” and asks the National College of Attorneys General of the States and the Federal District to request the judgment of the matter by the plenary of the STF.
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