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Tax reform threatens to discourage the oil and gas sector in Brazil, directly impacting the economy and national production. Projections point to billion-dollar losses in revenue and a future dependence on imported fuels.
Um tax reform project is raising controversy and concerns on several fronts. Experts warn of a worrying scenario: Brazil could lose trillions of reais in revenue in the coming decades, while the strategic oil and gas sector faces a possible collapse.
By trying to balance environmental sustainability and revenue, 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 activities that are harmful to the environment and health.
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However, energy sector experts point out that the incidence of this tax on oil and gas production could have the opposite effect to that desired.
Jose Roberto Afonso, economist and researcher, brought to light alarming numbers: Brazil could lose around BRL 3,7 trillion in revenue until 2055 if this measure is implemented.
The data of Energy Research Company (EPE) show that, currently, Brazil is on track to reach peak oil production in 2030, with around 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 represents a reduction of 86%, placing Brazil in the position of a net importer of fuels, rather than an exporter.
Exports at risk: from abundance to dependence
In addition to being one of the pillars of Brazil's trade balance, oil accounts for a significant portion of the country's trade surplus.
Between January and August 2024, exports of oil and derivatives represented around 40% of the total surplus, offsetting declines in agribusiness performance.
With the possible drop in production and the increase in fuel imports, the Brazilian trade balance could become destabilized, leading to a direct impact on the exchange rate and public accounts.
This scenario is aggravated by the fact that imported fuels would not be taxed with IS, while national 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 on public coffers and investors
In 2023 the Petrobras raised around R$ 240 billion in taxes, representing a significant portion of the public budget.
The reduction in this revenue could compromise investments in strategic sectors, such as health, education and infrastructure.
Furthermore, the selective tax would bring uncertainty to investors, reducing the attractiveness of the Brazilian energy sector.
According to the study presented by Afonso, a rate of just 1% on revenue from extraction projects could reduce 0,35 percentage points rate of return of ventures, scaring away national 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 IS to 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 of the country, thanks to the predominantly renewable energy matrix.
Experts question whether including the sector in the selective tax would be effective in combating climate change or whether it would bring more harm than good.
The role of Congress and next steps
The tax reform proposal is still being analyzed by the National Congress.
Oil and gas industry leaders, together with experts, have been making efforts to exclude the segment from the list of activities subject to IS.
According to recent information, the Senate is expected to vote on adjustments to the text in 2024. Pressure to change the project increased after the results of studies that highlighted the negative economic impact.
Parliamentarians are trying to find a balance between tax collection, environmental sustainability and international competitiveness, but the challenge is enormous.
The future of Brazilian energy sovereignty
The debate on tax reform raises a central question: how can Brazil maintain its energy sovereignty and, at the same time, move 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?
