Single and fixed ICMS rate could lead to a loss of R$5.5 billion for 20 States, says CNM – Economy

BRASILIA – The change in ICMS about fuels for a single, fixed rate model per liter of ethanol, diesel or gasoline, as defended by the president of the Chamber, Arthur Lira (PP-AL), would result in a loss of revenue of R$ 5.517 billion for 20 states, according to calculations by National Confederation of Municipalities (CNM) obtained by Estadão/Broadcast. As the tax is shared with city halls, this would mean a lower transfer of R$ 1.379 billion to their respective municipalities.

the state of São Paulo it would be the biggest “winner”, with an increase of R$ 3.865 billion in its ICMS tax collection on fuels. The government of São Paulo is headed by João Doria (PSDB), political opponent of the president Jair Bolsonaro.

In addition to SP, another five states would absorb the additional revenues (the study did not include the Federal District). Therefore, the proposal would be “neutral” from the aggregate point of view, but not from the regional aspect, argues the CNM, which considers the project “unfeasible”.

According to the entity’s estimate, the rates that would result in a “neutral charge” for consumers would be R$ 0.49 per liter of diesel, BRL 1.19 per liter of Gasoline and BRL 0.48 per liter of ethanol.

“As the definition of the single rate, according to the substitute, would occur by resolution of the National Council for Finance Policy (Confaz), which occurs by a majority of two-thirds, in addition to a third of each region, this level of aliquot would never be approved”, states the CNM in the technical note.

To avoid losses to States and municipalities and guarantee the same level of current collection for all, it would be necessary to excessively increase these rates, to R$ 0.60 per liter of diesel, R$ 1.40 per liter of gasoline and R$ 0. 68 per liter of ethanol. These rates would have a greater chance of approval by Confaz, but would mean an additional charge of R$ 17.572 billion in ICMS, making consumers’ pockets even more burdensome and raising the tax burden. The growth would be 21.92% compared to the current tax collection.

“The Union is saying that the States are to blame (for the rise in fuel prices), because the ICMS is very high, but nobody changed the rate. It is the federal policy that, depending on the dollar, of the energy system of the Petrobras, made the value of the fuel skyrocket internally”, says the president of the CNM, Paulo Ziulkoski. “If the Union wants to change, let it change its taxes. Energy policy is not for states and municipalities”, he says.

Ziulkoski says he will present the numbers to deputies before the proposal is voted on in the Chamber of Deputies and he also says he expects support from the governors, since they are the ones who lose the most revenue. He compares the discussion of the project to the episode involving the renovation of the Income tax, in which regional governments also criticize the negotiations undertaken by the Union and which result in losses for states and municipalities.

“The Union wants to change things on the backs of the States and municipalities, as in the Income Tax”, says the president of the CNM.

ICMS is currently levied on the price of fuel – the weighted average price to the final consumer, which is readjusted every 15 days. Each State is competent to set the rate. In the case of diesel, it ranges from 12% to 25%, according to data from the National Federation of Trade in Fuels (Fecombustíveis). For gasoline, the rate varies between 25% and 34%.

Under the proposal, the tax would have a fixed value per liter of fuel – like federal taxes PIS, Cofins and Cide, also incidents about the product. If approved, the States and the Federal District must regulate the new law through Confaz, an agency that brings together state secretaries of Finance, within 90 days.

Last week, during an event with Bolsonaro, Lira replied the ally’s speech and even blamed state taxes for the rise in fuel. The president of the Chamber demanded, at the time, a quota of sacrifice from the governors to solve the problem.

A day later, Lira met with party leaders and backed away from criticism of the governors. Then, he announced that he would invite the States and Petrobras to dialogue and seek an agreement to contain the rise in fuel prices. Since then, the proposal to set a single ICMS rate has been part of the negotiations.