Brazil’s State Secretaries decide to end tax freeze on fuels

RIO DE JANEIRO, BRAZIL – The National Committee of Treasury Secretaries (COMSEFAZ) announced Friday, January 14, that it will end the freeze on Value-added Tax on Sales and Services (ICMS) on fuels on the originally scheduled date, January 31.

Piauí governor and coordinator of the National Governors Forum Wellington Dias released a note with the following statement: “We did our part by freezing the reference price for ICMS, but this concrete step was not valued, the people were not respected. The response was an escalation upon escalation of fuel prices.”

He also considered that the gasoline and diesel hikes have only helped to “increase Petrobras’ profits” and demanded a definitive solution for fuels through tax reform.

“Most states voted to maintain the freeze rule only until the end of January, considering the federal government’s refusal to dialogue and the successive fuel hikes, with no concern for its economic and social impact,” he added.

There was a dispute among the State Treasury Secretaries over the renewal of the measure.

Part of them considered that the measure was enough to show that President Jair Bolsonaro was wrong to blame the states for the high prices of gasoline and diesel. Another part considered that it would not be appropriate to recalculate the tax during an election year.

Before the freeze, the ICMS was levied on the average consumer price, which is readjusted every 15 days.

Each state is empowered to set the rate. According to data from the National Fuel Trade Federation (FECOMBUSTÍVEIS), it ranges from 25% to 34% on gasoline, depending on the state. Despite the ICMS tax stagnation since November 1, the price of fuel has continued to rise at service stations.

The end price of fuel comprises the amount charged by Petrobras at refineries (linked to the price of a barrel of oil on the international market and to the exchange rate), plus federal taxes (PIS/Pasep, Cofins, and Cide) and state taxes (ICMS), in addition to the distribution and resale margins and the cost of biodiesel, in the case of diesel oil, and of ethanol, in the case of gasoline.