Brazil’s Bolsonaro sanctions inflation-busting ICMS law

RIO DE JANEIRO, BRAZIL – President Jair Bolsonaro on Thursday (23) approved the bill to limit state-level VAT (ICMS) on diesel, gasoline, electricity, communications, and collective transport.

The funds saved will be used to try to increase the value of the ‘Brazil aid’ (survival assistance called Auxilio Brasil). Now, the presidential palace has decided to increase the Brazil aid from R$400 to possibly R$600 (US$115) per month by the end of 2022.

The ICMS is a state tax that accounted for 86% of state revenues in 2021, or R$652 billion. The new law aims to curb the effects of inflation by lowering the prices of products considered vital to Brazilians. However, the changes reduce state tax revenues.

For goods considered essential and indispensable, states cannot charge a higher rate than the general ICMS rate of about 17%.