Governors articulate action in the STF against change in ICMS on fuel – 10/14/2021 – Market

Contrary to the bill that changes the rule on fuel taxation, governors must file a lawsuit in the STF (Supreme Federal Court) to try to stop the measure if the Senate also approves the proposal. The text passed through the Chamber this Wednesday (13).

The expectation in the Senate is that the proposal will be able to move forward, despite the resistance to altering taxes that could harm states and the view that the bill approved in the Chamber confirms the speech of President Jair Bolsonaro, who blames governors for the price of fuel. Leaders from the main benches believe that “something needs to be done”.

Sponsored by the president of the Chamber, Arthur Lira (PP-AL), the project foresees that the ICMS (state tax) will become a fixed amount. The states and the Federal District may annually define specific rates. The tax rate will be calculated based on the average value of fuels in the last two years.

Today, ICMS is calculated based on a reference price, known as the PMPF (Weighted Average Price to the Final Consumer), revised every 15 days according to a price survey at the service stations. On this amount, the rates of each fuel are applied.

With the change, Lira and government allies say the price of gasoline is expected to drop 8%. In the case of ethanol, the drop would be 7%, and 3.7% for diesel. The calculation method, however, was not disclosed.

Governors, who will lose revenue, and opposition lawmakers say that the measure does not address the real problem of rising fuel prices, which is related to the devaluation of the exchange rate and the increase in the value of a barrel of oil on the international market.

“The sharp increase in fuel prices has nothing to do with [as alíquotas do] ICMS. Prices will continue to rise and this will demoralize everyone”, assesses the president of the Northeast Consortium and governor of Piauí, Wellington Dias (PT).

The argument for triggering the STF is that it would not be up to Congress to define the ICMS rules, but to the states.

“I am impressed by how a bill on state taxation is being voted in Congress. There is no constitutional authorization for those precepts”, said Dias.

The president of the Forum of Governors and Governor of the Federal District, Ibaneis Rocha (MDB), also stated that the Chamber’s proposal is unconstitutional.

“Petrobras, which is a public company, is a company of the Brazilian people, which has been constantly generating increases in fuel and cooking gas for the population. They want to transfer the responsibility to the states, but we are going to stop this in the Federal Supreme Court”, said Ibaneis.

Febrafite (Brazilian Federation of Tax Associations for State Taxes) calculates that Lira’s proposal would generate a loss of R$ 24 billion per year in state and municipal tax revenues.

The calculation was used by Comsefaz (National Committee of State Finance Secretaries), which released a note on Wednesday against the project sponsored by the president of the Chamber.

In the Senate, there is the feeling that “something needs to be done” to hold fuel prices down, so as not to hinder the resumption of economic growth and hold back inflation.

“I think that something needs to be done to curb this soaring price of fuel and electricity”, answers Eduardo Braga (MDB-AM), leader of the largest bench in the Senate, when asked about the chances of the proposal moving forward in the Senate.

The government’s leader in Congress, senator Eduardo Gomes (MDB-TO), says that it will be necessary to wait until the beginning of next week to see what the chances of the proposal approved in the Chamber prosper.

Gomes says that historically the Senate is linked to the governors, which would signal a tendency to shelve the project that dislikes the states. However, the current moment is different and that is why he considers that the pressure to vote on the proposal may be greater than the resistance to it.

“A year ago, I would say I rejected [a proposta], because there was a certain incidence of governors. After all, the Senate is the House of States,” he said.

“But I currently see a lot of pressure to vote. So we’ll have to wait until the beginning of next week to get an idea,” he added.

The opposition, however, promises to impose obstacles to the proposal, arguing that it is just a “palliative”, with little concrete effect.

“This measure that the Chamber ended up making has the intention of keeping in the air this accusation of President Bolsonaro to the governors in the sense of being them, or of the application of the ICMS tax being responsible for the price of fuel, and everyone has seen that it is a nonsense,” said minority leader Jean Paul Prates (PT-RN).

The PT senator adds that the problem of rising prices is structural.

“This measure is a dangerous palliative. It’s just an anesthetic. The pain of the crisis caused by real-time dollar readjustments is caused by the domestic price policy adopted since 2017. The economic recovery of the world economy and the European winter project even more increases until January 2022”, he says.

“Brazil is self-sufficient in oil and should not be 100% subject to the weather and circumstances of other countries”, he added.

In the same vein, the leader of Podemos in the Senate, Álvaro Dias (Podemos-PR), assesses that the project will not solve the problem and that the changes will only be palliative.

“These patchwork patches further complicate the system [tributário]. There are two other key measures: tax reform, taxing less on consumption and more on income. This would also affect the price of fuel,” he said in a video posted on his social networks.