Tax Incentives: Impact of Exemptions on the Brazilian Oil Sector (2015-2023)

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Published on 11/09/2024 at 17:44

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Tax Breaks of $260 Billion Were Granted to 267 Oil Companies Between 2015 and 2023, Impacting Federal Government Revenue with Incentives and Tax Exemptions.

The tax breaks granted to 267 oil industry companies totaled R$ 260 billion between 2015 and 2023. A groundbreaking study by the Institute of Socioeconomic Studies (Inesc) highlighted the extensive benefits provided to the oil and gas sector during this period.

These tax breaks had a significant impact on the revenue of the federal government, reflected in subsidies and other economic incentives. The study also pointed out that, in addition to the breaks, companies in the sector enjoyed various tax exemptions that contributed to the reduction of the tax burden. This evidences broad government support for the industry, resulting in a more favorable environment for investments.

These amounts, which include incentives, tax benefits and exemptions, were directed to 267 companies in the sector, directly affecting the revenue of the federal government. Just last year, the oil industry benefited from R$ 29 billion. In 2020, the amount of tax breaks reached R$ 56 billion, marking the highest peak recorded.

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Need for Strategic Planning for the Energy Transition

This scenario underscores the urgent need for strategic planning for the energy transition in Brazil. It is crucial to consider the urgent reduction of fossil fuel use, alongside the preservation of jobs and the stimulation of low-carbon production chains. Alessandra Cardoso, political advisor at Inesc, emphasizes this need.

The data was obtained from the Federal Revenue Service, which, in 2023, began to disclose detailed information by legal entity benefited, as defined by Ordinance No. 319 of that year.

Inesc Survey and Details on the Special Repetro Regime

The survey conducted by Inesc used this information, accessed through the Freedom of Information Act (LAI), to identify the amounts associated with companies qualified under the Special Repetro Regime – a customs regime that exempts the oil industry from various taxes. The database of this analysis is available at this link: . The data reveals a significant growth in tax breaks since 2017, when the Repetro was renewed until 2040 by Law 13.586/2017, expanding the scope of the regime and further benefiting companies in the sector.

The main taxes from which companies were exempted include PIS, Cofins, Import Tax (II), and Industrialized Products Tax (IPI). Additionally, incentives were granted by the Superintendencies for Development of the Northeast (Sudene) and the Amazon (Sudam).

Transnational Companies Among the Largest Beneficiaries of the Tax Break

The majority of the 267 companies benefiting from Repetro are transnational, receiving benefits granted to foreign companies. Among the largest beneficiaries are MODEC Serviços de Petróleo do Brasil Ltda and Ventura Petróleo, highlighting the multiplicity of regimes and incentives, such as tax exemptions, that these companies have access to.

According to Inesc, while Ordinance No. 319 of 2023 represents a step forward by enabling information about the subsidies granted to the oil industry, there is still a lack of transparency in the special Repetro regime. Tax breaks in the country are not disclosed in the Tax Expenditure Demonstrations of the Federal Revenue Service. The justification given by the RFB is the technical impossibility of computing these breaks.

Brazil’s Relationship with the Oil Industry

‘Brazil’s relationship with the oil industry is marked by a profound asymmetry of information and by the false promise that oil revenue will finance the energy transition’, explains Alessandra. ‘Sustaining this expectation is wasting precious time in the fight against climate emergencies‘, she concludes.

Table 1: Tax Breaks Associated with Companies Qualified for Repetro (in R$ Million)

Year	COFINS	PIS	II	IPI	SUDAM/SUDENE 75% IRPJ	SUDAM/SUDENE reinv	TOTAL
2015	7,814.66	1,612.73	6,657.95	756.18	66.39	1.38	16,909.30
2016	7,112.79	1,448.02	7,483.34	728.11	60.67	1.42	16,834.34
2017	4,607.55	960.40	4,688.11	578.12	74.83	1.32	10,910.32
2018	9,534.48	1,944.39	10,420.47	646.64	859.93	45.92	23,451.82
2019	13,162.44	2,834.03	16,511.33	1,604.98	680.98	1.47	34,795.23
2020	21,032.27	4,535.33	28,374.79	2,096.66	94.05	3.61	56,136.70
2021	18,440.99	4,001.87	20,360.23	1,546.73	873.90	45.81	45,269.53
2022	12,147.08	2,631.47	8,215.16	611.95	2,922.72	166.06	26,694.43
2023	13,011.67	2,990.52	11,589.82	682.27	ND (*)	ND (*)	29,074.28
TOTAL	107,663.91	22,958.75	114,301.20	9,251.63	5,633.47	266.98	260,075.95

Source: information from the RFB through LAI.

Preparation: Inesc.

(*) The RFB did not present tax waiver data under the SUDAM and SUDENE in 2023.

Source: Press INESC

Tax Incentives: Impact of Exemptions on the Brazilian Oil Sector (2015-2023)

Tax Breaks of $260 Billion Were Granted to 267 Oil Companies Between 2015 and 2023, Impacting Federal Government Revenue with Incentives and Tax Exemptions.

Need for Strategic Planning for the Energy Transition

Inesc Survey and Details on the Special Repetro Regime

Transnational Companies Among the Largest Beneficiaries of the Tax Break

Brazil’s Relationship with the Oil Industry

Table 1: Tax Breaks Associated with Companies Qualified for Repetro (in R$ Million)

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Tax Incentives: Impact of Exemptions on the Brazilian Oil Sector (2015-2023)

Tax Breaks of $260 Billion Were Granted to 267 Oil Companies Between 2015 and 2023, Impacting Federal Government Revenue with Incentives and Tax Exemptions.

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Inesc Survey and Details on the Special Repetro Regime

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Table 1: Tax Breaks Associated with Companies Qualified for Repetro (in R$ Million)

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Chinese engineers begin filling a 217-meter dam at an altitude of 3,000 meters and prepare a 2,240 MW hydroelectric power plant to integrate hydropower, solar, and wind energy in the upper Jinsha.

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