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Federation of Industries of Espírito Santo takes a stand against tax on crude oil exports

Written by Bruno Teles
Published 25/04/2023 às 15:09
crude oil export tax
crude oil (photo/disclosure)

The collection of transitional tax on oil exports has generated dissatisfaction in several sectors of the Brazilian market, especially in the oil and natural gas industry.

With the intention of questioning the rate of 9,2% that was created as an Export Tax on operations that send crude oil abroad, the Brazilian Association of Gas Exploration and Production Companies (ABEP) proposed a direct action of unconstitutionality (ADI) whose main objective is to suspend the collection. Now, the Federation of Industries of Espírito Santo (Findes) joined as amicus curiae (friend of the court) in that same action.

Effective from March 1st to June 30th, the collection of transitional tax was created by Provisional Measure (MP) 1.163/2023 with the purpose of offsetting the collection losses with the partial exemption of gasoline and ethanol, which extended until the end of June. From the beginning, the collection of the tax generated a lot of criticism, since it is a tax on exports, which is not common in the market. This situation raised concerns about legal uncertainty in other sectors linked to the international trade, such as agro and mining.

Brazilian Association of Gas Exploration and Production Companies proposes direct action of unconstitutionality

In this context, Findes is one of the institutions which sees the transitional tax as a factor that increases the legal instability of the sector and reduces the competitiveness of the national oil industry in attracting investments. With the action as amicus curiae, Findes seeks to reinforce this argument with the Federal Supreme Court (STF).

In addition to Findes, other institutions also joined the ADI as amicus curiae, such as the National Confederation of Industry (CNI), the National Organization of the Petroleum Industry (Onip), the Federation of Industries of Rio de Janeiro (Firjan), the Government of the State of Rio de Janeiro, the Organization of Petroleum Producing Municipalities (Ompetro) and the Municipality of Macaé (RJ).

Findes joins the lawsuit as amicus curiae and reinforces the argument against the tax collection

A President of Findes, Cris Samorini, assesses that the creation of specific taxes for oil that affect the entire value of the product, regardless of profitability, changes the perception of risk in the brazilian oil industry.

With this new charge, Brazil starts to lose investment attractiveness due to the legal uncertainty caused by the arbitrariness in the alteration of specific taxes. This measure has a negative impact on planned or even ongoing investments, creating a lack of legal certainty.

As oil exports they are the third most important item in the Brazilian trade balance, corresponding to a surplus of US$ 65 billion over the last four years. At the Espírito Santo, oil and natural gas industry exported, in 2022, US$ 1 billion, a value that represents 1,7% of the sector's foreign sales in the country and 11,4% of the State's total foreign sales.

Transitional tax may affect the competitiveness of the national oil industry in attracting investments

Findes' positioning in relation to the ADI is a reflection of the concern regarding the impact of taxation on the oil and gas industry in Brazil, since, with the continuity of the collection of the transitory tax, the industry competitiveness will be affected.

It is important to remember that the final decision on whether or not to suspend the collection of the 9,2% transitory tax on crude oil export will be from the Federal Supreme Court, but the participation of Findes as amicus curiae can bring important information and help to form a more careful and thoughtful decision.

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Bruno Teles

I talk about technology, innovation, oil and gas. I update daily about opportunities in the Brazilian market. With more than 3.000 articles published in CPG. Agenda suggestion? Send it to brunotelesredator@gmail.com

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