Oil And Gas Sector On Alert: Challenges With New Taxation

Written by Corporativo

Published on 12/01/2024 at 06:38

Foto: https://www.ibp.org.br/noticias/posicionamento-ibp-reforma

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Economic Impact of the Oil and Gas Sector in Brazil

The Oil and Gas (O&G) sector, one of the pillars of the Brazilian economy, faces challenges with the introduction of new taxes. The Brazilian Institute of Oil and Gas (IBP), representing the sector, emphasizes the relevance of the oil industry in generating jobs, income, and significant fiscal contributions through taxes, royalties, and special participations. In 2023, the oil and gas industry in Brazil contributed R＄ 92.2 billion in payments, including R＄ 53.6 billion in royalties and R＄ 38.6 billion in special participation, according to data from ANP. These resources are essential for meeting fiscal targets and developing public policies by the Union, States, and Municipalities.

The sector was responsible for 10% of the country’s industrial GDP in 2020, according to CNI, and exports of oil and derivatives generated a surplus of US＄ 80 billion over the past four years. The segment plans to invest US＄ 183 billion in exploration and production between 2022 and 2031, sustaining an average of 445 thousand jobs per year.

Challenges with New Tax Burdens

Despite the high tax burden on the sector, around 70%, which already provides significant revenue, Governments have been promoting increases in this burden. The Control, Monitoring, and Inspection Fee for Oil and Gas Exploration and Production Activities (TFPG), approved by the government of the State of Rio de Janeiro in December 2023, and the Selective Tax, introduced in the Tax Reform, pose significant risks for the sector and society.

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The new charges may negatively impact investment decisions of companies and potential investors, affecting the attractiveness of the oil and gas sector in Brazil. This could undermine the country’s competitiveness compared to other regions of the world vying for investments in oil and gas projects.

Moreover, new taxes on exploration, production, and commercialization activities of oil and gas may affect legal security and the confidence of agents and investors in the Brazilian market, with negative medium- and long-term impacts on the industry.

IBP Vision and the Future of the Sector

The IBP and its associates believe that the sustainable and continuous development of the Brazilian oil and gas industry depends on a business environment that values rule stability, dialogue between public and private agents, and actions that continuously attract investments to the sector. The entity emphasizes the need for balance in tax decisions to ensure the growth and competitiveness of the sector in the global scenario.

Source: Rodrigo Dutra – dutra@fsb.

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Oil And Gas Sector On Alert: Challenges With New Taxation

Economic Impact of the Oil and Gas Sector in Brazil

Challenges with New Tax Burdens

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Oil And Gas Sector On Alert: Challenges With New Taxation

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At over 8,800 meters above sea level, the summit of Mount Everest is made up of rocks that originated at the bottom of an ocean about 500 million years ago and were pushed to the highest point on Earth by the collision of tectonic plates.

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The aircraft carrier HMS Prince of Wales is heading to the Arctic with F-35 fighters, helicopters, and warships in an operation that repositions the United Kingdom at the forefront of NATO in 2026.

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