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President Lula met on Monday (27) with the Minister of Finance, Fernando Haddad, to discuss the postponement or not of tax exemption on fuels. Also participating in the meeting were the Minister of the Civil House, Rui Costa, and the President of Petrobras, Jean Paul Prates.
These taxes have been zeroed since the government of Jair Bolsonaro and were extended by Lula in January. The exemption of PIS/Cofins ends tomorrow, but without the exemption, there could be an increase in fuel prices: R$ 0.80 per liter for gasoline and R$ 0.25 for ethanol. The end of this exemption of taxes on fuels would bring a relevant impact of up to 0.6% on market inflation projections.
According to the Minister of Finance, the re-taxation of the tax had already been implemented in January. However, pressured by the political wing of the government, Lula granted two more months of exemption through a provisional measure. Now the president needs to decide between a political defeat for Haddad and a backlash with the increase in taxes on fuels. One possibility would be a partial re-taxation of the taxes, which would result in an increase of R$0.49 for gasoline and R$0.06 for ethanol.
Federal Tax Collection on Fuels Resumes in March, Says Federal Revenue
End of Gasoline Tax Exemption: Price May Rise by Up to R$0.68 Per Liter
The federal government announced last Thursday the return of taxes on fuels starting March 1. The Brazilian Association of Fuel Importers (Abicom) estimates that the price of gasoline at gas stations will increase by an average of R$0.68 per liter. The hydrated ethanol will also have an adjustment, with an estimated increase of R$0.24 per liter.
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These measures were taken after the tax exemption on fuels came into effect last year and was extended by the Lula government for two months. With the return of taxes on fuels and diesel at the Petrobras refineries, they would be 8% above the international market, according to Abicom. In Bahia, where the only relevant private refinery, Refinaria Mataripe, is located, this number reaches 10%.
Last year, Jair Bolsonaro announced reductions in ICMS for some essential products and fuels in order to reduce inflation. However, this exemption was only to last until January 1. Lula decided to maintain this measure until the end of February for gasoline and alcohol and until the end of the year for diesel, biodiesel, natural gas, and cooking gas.
Now, with the return of federal taxes on fuels in Brazil, a significant impact on the economy is expected. The president of Petrobras Jean Paul Prates will meet with Lula on Thursday to discuss the consequences of the taxes on fuels in the country.
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