Tax Reform Raises Alarm Over Tax Evasion in the Fuel Sector

Institute Warns of the Risk of Increased Default with New Taxes

The debate over tax reform is taking concerning shapes in the fuel sector. The Legal Fuel Institute (ICL) expresses serious concerns about the current proposal that, according to them, could intensify practices of tax evasion and default in the fuel and lubricant market.

Tax Burden on the Rise

The ICL, observing the progression of tax reform in the Senate, identifies imminent risks with the potential introduction of the Selective Tax in the fuel sector. This tax increase adds to the already complex system of ICMS, PIS/COFINS, CIDE-Fuels and, in certain states, the Poverty Participation Fund (FCP). According to the Institute, this could expand the activities of so-called chronic debtors, whose actions already cause annual losses exceeding R$ 14 billion due to tax evasion and default, in addition to R$ 15 billion in fraud related to the quality and quantity of fuels.

For a Coherent Tax System

The president of the ICL, Emerson Kapaz, emphasizes the need for a monofasic ICMS system for fuels – with a uniform rate and collection at the base of the chain (production or import). The adoption of a fixed rate per liter of fuel (ad rem) would simplify the tangled web of tax regulations, which many experts compare to a “madness.” The institution advocates for this uniformity also for hydrated ethanol, aiming to ensure competitive equality and curb fraud in the sector.

Combating Unfair Competition

The approval of Bill 164/2022 is seen by the ICL as an urgent measure to tackle the problem of chronic debtors. Such federal legislation would help eliminate from the market competitors who operate with prices below reality, as they do not pay taxes, distorting market conditions. The Institute reiterates that the change in legislation would be a preventive element against these practices.

“We are facing a crucial moment where preventive measures, such as the characterization of the chronic debtor and tax reform, can change the current scenario,” concludes Kapaz, pointing to an opportunity for strategic restructuring in the sector.

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Source: Rodrigo Dutra – rodrigo.dutra@fsb.com.br.

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