Brazil stopped raising R$ 118 billion in 2021 to subsidize the consumption and production of fossil fuels, and the expectation is that this amount will increase this year, in the face of new exemptions announced by the Jair Bolsonaro (PL) government.
The data is the result of the study “Subsidies to fossil fuels: know, evaluate, reform”, released this Wednesday (16) by Inesc (Institute of Socioeconomic Studies), in an event simultaneous to COP 27, UN conference on climate change .
More than 60% of the 2021 amount was allocated to subsidize consumption, such as PIS/Cofins and Cide-Combustíveis exemptions on gasoline and diesel, which represented a loss of R$ 60 billion in revenue last year.
Almost 40% were used to finance production, with emphasis on Repetro, a program that exempts import and domestic production of machinery and equipment for oil and gas exploration from taxes.
“Subsidies are not very effective for controlling inflation, since the increase in prices is not due to the increase in taxes, but rather to the internalization of fluctuations in international prices, so much so that inflation remained high in 2022, even with the last year’s resignations”, says Livi Gerbase, political advisor at Inesc.
For the institution, as these measures are not directed at the poorest, they tend to favor richer families, who spend proportionately more on fuel.
Even its indirect impact on other costs is limited and short-term. There are also doubts as to whether tax waivers are fully passed on to consumers. A survey by the Petroleum Social Observatory showed an increase in service station profit margins after recent measures in this regard.
“These benefits to the sector should be limited in time and thought from the needs of the poorest people, because, the way they are, the subsidies only deepen the inequalities even more”, he says to specialists on the cut of taxes that also finance the security.
The expectation is that the value of the subsidies will increase in 2022, when the PIS/Cofins, PIS-Import and Cofins import rates on fossil fuels were zeroed, on the eve of the election period, and a ceiling was instituted for the state ICMS.
In the case of ICMS, the loss of collection was estimated by the IFI (Independent Fiscal Institution) at R$ 13.3 billion for states, which collect, and for municipalities, which receive a portion of the tax. PIS/Cofins on fuels has an estimated loss of R$ 17.6 billion for the federal government.
Inesc’s data consider tax waivers and direct expenses, such as resources from the federal budget for oil companies to carry out research, for example.
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