Portuguese 
English 
Spanish 
4 min of reading 
0 comments 
Tax Reform Threatens to Deter the Oil and Gas Sector in Brazil, Directly Impacting the Economy and National Production. Projections Point to Billion-Dollar Losses in Collection and a Future Dependent on Imported Fuels.
A tax reform project has sparked controversies and concerns on several fronts. Experts warn of a troubling scenario: Brazil could lose trillions of reais in revenue over the coming decades, while the strategic oil and gas sector faces a potential collapse.
In attempting to balance environmental sustainability and revenue collection, the government may end up sacrificing its energy sovereignty at one of the most critical moments in the country’s economic history.
At the heart of the debate is the Selective Tax (IS), which was designed to discourage harmful activities to the environment and health.
-
War in Iran and risk in Hormuz cause a 31.47% drop in Brazil’s exports to the Gulf in March, with corn almost zeroed out and sugar in sharp decline, while more expensive freight and longer routes hinder agribusiness shipments.
-
Correios’ loss soars to R$ 8.5 billion in 2025 and restructuring plan faces low uptake — the state-owned company attempts to prevent financial collapse
-
The Government of China arrives in Brazil and joins TikTok’s data center project of up to R$ 200 billion in Ceará, with 200 MW of capacity, an initial investment of R$ 11 billion, and delivery expected for 2029 in Pecém.
-
A resident discovers he was paying the electricity bill for a tourist attraction and will now earn a fortune because of it.
However, experts in the energy sector point out that the incidence of this tax on oil and gas production may create an opposite effect to that desired.
José Roberto Afonso, an economist and researcher, raised alarming figures: Brazil could lose around R$ 3.7 trillion in revenue by 2055 if this measure is implemented.
Data from the Energy Research Company (EPE) shows that, currently, Brazil is on track to reach its peak oil production in 2030, with about 5 million barrels per day.
However, projections indicate that under the new taxation, production could plummet to just 500 thousand barrels per day by 2055.
This means a reduction of 86%, placing Brazil in the position of a net importer of fuels instead of an exporter.
Export Risk: From Abundance to Dependency
In addition to being one of the pillars of the Brazilian trade balance, oil accounts for a significant portion of the country’s trade surplus.
Between January and August 2024, oil and derivatives exports represented about 40% of the total surplus, compensating for declines in the agribusiness sector.
With the potential drop in production and increased fuel imports, the Brazilian trade balance could destabilize, leading to a direct impact on exchange rates and public accounts.
This scenario is worsened by the fact that imported fuels would not be taxed with the IS while domestic production would be burdened with the new taxation.
“This is a paradox”, says Afonso, highlighting that the tax would harm Brazilian competitiveness while favoring international suppliers.
The Burden for Public Coffers and Investors
In 2023, Petrobras collected around R$ 240 billion in taxes, representing an important slice of the public budget.
A reduction in this revenue could compromise investments in strategic sectors, such as health, education, and infrastructure.
Furthermore, the selective tax would bring uncertainties for investors, decreasing the attractiveness of the Brazilian energy sector.
According to the study presented by Afonso, a rate of only 1% on the revenues of extraction projects could reduce the return rate by 0.35 percentage points for the ventures, scaring away both domestic and foreign investors.
This would occur at a time when Brazil needs external capital to boost its economy.
Environmental Sustainability or Economic Strategy?
The justification for applying the IS in the oil and gas sector is its contribution to greenhouse gas emissions. Globally, the energy sector is the largest emitter of CO₂.
However, the Brazilian reality is different: the energy sector in Brazil represents only 18% of total emissions in the country, thanks to its predominantly renewable energy matrix.
Experts question whether including the sector in the selective tax would be effective in combating climate change or if it would bring more harm than benefits.
The Role of Congress and the Next Steps
The proposed tax reform is still being analyzed by the National Congress.
Leaders in the oil and gas sector, along with experts, have been working to exclude the segment from the list of activities subject to the IS.
According to recent information, the Senate is expected to vote on adjustments to the text in 2024. The pressure to amend the project has increased after studies highlighted the negative economic impact.
Parliamentarians are trying to find a balance between tax revenue, environmental sustainability, and international competitiveness, but the challenge is immense.
The Future of Brazilian Energy Sovereignty
The debate around tax reform brings to the forefront a central question: how can Brazil maintain its energy sovereignty while simultaneously advancing towards a more sustainable economy?
With trillions of reais in revenue and thousands of jobs at risk, the decisions made by Congress in the coming weeks will be crucial in defining the country’s future.
Will Brazil be able to find a balance between environmental preservation and economic development without compromising its leadership in the global energy sector?
-
1 person reacted to this.