Chamber approves basic text of project that changes ICMS rules on fuels | Policy

The Chamber of Deputies approved this Wednesday (13) the basic text of a project that changes the calculation of taxation on fuels. The proposal determines that the ICMS charged in each state will be calculated based on the average price of fuel in the two previous years.

To conclude the matter, lawmakers still need to analyze the highlights, which are punctual suggestions for changing the main text. Then the matter will go to the Senate.

Today, the ICMS applied to fuels is based on the average price of gasoline, diesel and ethanol in the previous 15 days in each state. That is, every 15 days, the calculation basis changes – and includes the recent price fluctuation.

By extending this reference period to two years, advocates of the measure claim that it would be possible to reduce volatility in prices charged at service stations.

According to the president of the Chamber, Arthur Lira (PP-AL) – supporter of the text –, the change will allow a reduction in the price of gasoline by 8%; of ethanol by 7%; and diesel by 3.7%. See more details in the video below:

Lira, on the rise in fuel: 'We never said that the ICMS starts to increase.  But he's a mean cousin'

Lira, on the rise in fuel: ‘We never said that the ICMS starts to increase. But he’s a mean cousin’

Under the proposal, states have autonomy to annually define their own rates, as long as they do not exceed, in reais per liter, the value of the average prices “usually practiced in the market” in the last two years. The amount of this tax must be in effect for 12 months.

If the text becomes law, the first adjustment made by the states should consider the average price between January 2019 and December 2020.

Senate President Rodrigo Pacheco (DEM-MG) said that the House will have “good will” to analyze and eventually “improve” the proposal when the vote is concluded in the Chamber.

“We all share the thesis that we have to stabilize the price of fuel and make the price a price that is palatable for the country. There is no way to develop the country with fuel at this price today in Brazil,” he declared.

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States fear lost revenue

State government representatives point out, however, that the new rule will cause damage to local revenue.

In a statement released on Wednesday (13), the National Committee of State Finance Secretaries (Comsefaz) states that, if approved, the project should reduce state finances by BRL 24 billion – which consequently means loss of BRL 6 billion to municipalities. See below:

Auditors predict an average loss of R$24.1 billion in one year with change in ICMS

Auditors predict an average loss of R$24.1 billion in one year with change in ICMS

Also according to the council, the measure will have no effect on the price of fuel, since it will focus only on a part of its value components.

“It is to act palliatively on a portion of one of the effects of the increase in the price of fuel by Petrobrás and continue to ignore its cause, which will continue to operate on all other components”, says the note.

According to tax expert Luiz Gustavo Bichara, the proposal has favorable points, such as facilitating inspection by simplifying the collection model, since it shifts the responsibility for collecting ICMS to a few agents (oil refinery and alcohol plants).

However, according to the lawyer, the trend is that the effect in two years’ time will not be efficient.

“Like [o projeto] take the years 2019 and 2020 to fix the average [de 2021], immediately, there will be a reduction [nos preços]. However, two years from now, the effect will not be the same,” he said.

The rapporteur, deputy Dr. Jaziel (PL-CE), argues in his opinion that Federal and state taxes account for about 40% of the price of gasoline, according to a survey by the National Petroleum Agency (ANP).

In addition, the rapporteur denied, in plenary, that the governors will lose revenue. Then he said that if that happens, it will be a “small loss”.

“The governors are not going to lose. If they have to lose, it will be a small loss,” he said. “And it’s worth losing, since the people have nowhere to draw from, they can’t live. This climb must be enough.”

During the discussion of the matter, the leader of the PSOL, Deputy Talíria Petrone (RJ), said that the project is a “farce” and will not make an effective change in fuel prices.

“What is placed here is a farce. They are selling illusions to the Brazilian people. This needs to be deconstructed in this House. The project being voted on here will have the effect not only of a marginal drop in the price of gasoline at the tip, but also just an immediate drop,” he said.

The rapporteur rejected the proposal to scale the ICMS value nationally, which, according to him, would bring negative consequences – such as the risk of market shortages, since Petrobras might not be able to offer the product at a reduced price.

Also according to Dr. Jaziel, the price fixing by the government could make the construction of new infrastructure unfeasible.

“The risk of political interference in fuel prices prevents investors from being predictable about the return on capital needed to make investments,” he wrote in his opinion.

Originally, the proposal sent by the Executive provided for a uniform rate throughout the national territory. During the vote, the president of the Chamber said that the proposal sent by the government “has nothing to do” with the substitute.

“He [o projeto do governo] it aimed to unify ICMS rates in Brazil, which all of us did not agree with,” said Lira.