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By Unanimous Consent, The Confaz Approves The Extension Of The Freeze Period For ICMS On Fuels
The National Committee of Fiscal Policy (Confaz) legitimized, on 01/27, the extension of the period to freeze fuel prices for the calculation of the Tax on Circulation of Goods and Services (ICMS) until 03/31.
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The Confaz’s decision was unanimous among the 27 state secretaries of finance and the Federal District, extending the freeze on the average weighted price to the final consumer (PMPF) of ICMS on fuels by 60 days.
In a statement from the National Committee of State Finance, Finance, Revenue, or Taxation Secretaries (Comsefaz), it was reported that the PMPF freeze, which is the basis for calculating the ICMS on fuels, was decided by Confaz in October 2021, valid until 01/31. However, the last decision extended the current PMPF for another 60 days.
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On 01/26, the Governors’ Forum published a statement recommending the approval of the PMPF freeze as a temporary action to help control fuel price increases. However, the governors advocate creating structural solutions to stabilize fuel prices.
According to Comsefaz, the decision aims to show the states’ willingness to curb fuel price hikes.
Price Differences
Comsefaz emphasized that the finance secretaries believe that simply freezing the ICMS is not enough to prevent fuel price increases. According to the Brazilian Infrastructure Center (CBIE), in the most recent update of average fuel prices, the price differences for diesel and gasoline in the domestic market compared to the U.S. are 9.2% and 13%, respectively.
Additionally, the entity stated that it is in favor of creating an equalization fund as a way to prevent fluctuations in the price of crude oil in the international market from being passed on to final prices, causing regular increases.
Furthermore, it was reported that fuel price increases will only be controlled when the deregulation created by Petrobras’s political pricing changes comes to an end or with the approval of the tax reform of PEC 110/2019, which is ready for a vote in the Senate.
Murilo Viana, a public accounts expert and tax consultant, emphasized that since Petrobras has frozen price adjustments in December, the result of the freeze for ICMS calculation was minimal and did not affect consumers. “The freeze announced in October had a limited effect in practice because there were no price increases from Petrobras, and there was even a price reduction,” said Murilo.
The PEC that the president promises to eliminate taxes on fuels has low chances of benefiting consumers and may even lead to inflationary effects due to the growing deficit in public accounts.
According to Viana, only in the federal context, with the end of PIS-Cofins and the Contribution for Economic Domain Intervention (Cide) on fuels, there would be an impact on public accounts of nearly R$ 70 billion per year, and if all states eliminated the ICMS, the shortfall in governors’ accounts would be R$ 240 billion. He believes that inflation and fuel prices are issues that bother Bolsonaro, who is seeking a solution during an election year, while governors “sought to put a band-aid” on the issue by extending the ICMS freeze, as many are also in the electoral race.
The tax burden on the PMPF of a liter of gasoline, for example, varies from R$ 2 to R$ 3, according to Fecombustíveis. For Viana, this PEC represents a “catch-all for the government in an election campaign,” warning that it goes against the Constitution, as it affects even the revenues of municipalities. Source: Rosana Hessel for Correio Braziliense.
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