Brazil’s Energy Minister, Alexandre Silveira, calls on Petrobras to settle its tax issues as President Lula strives to balance the national budget.
Given the company’s large profits in past years, Silveira suggests Petrobras engage with tax authorities, reports Bloomberg Linea in its latest report.
He further states Petrobras shouldn’t just drag court cases on, which could take years.
An agreement could add R$ 30 billion to R$ 40 billion ($6.15 billion to $8.20 billion) to public funds, aiding in deficit reduction as government spending climbs.
Government sources indicate to Bloomberg Linea the company owes over R$ 100 billion ($20.5 billion) in overdue taxes.
These are related to unpaid import fees and overseas transfers. Brazil’s tax appeals council currently reviews this debt.
Finance Minister Fernando Haddad and Petrobras President Jean Paul Prates discussed potential debt settlement.
However, Petrobras denies any ongoing negotiations about back taxes.
Haddad’s strategy targets finding an extra R$ 168 billion ($81.48 billion) in revenue. This aims to achieve a zero primary deficit for 2024.
A recent rule change in the tax appeals council could expedite decisions, possibly bringing in up to R$ 55 billion ($26.675 billion) by the end of 2024.
Banking experts caution that paying this debt could affect Petrobras’s dividends. Yet, government economists argue that Petrobras must fulfill its tax duties.
Goldman Sachs estimates a $6 billion decline in Petrobras’s free cash flow if the tax review turns unfavorable.
Should Petrobras appeal any decisions, any possible refunds would be postponed.
Background
Petrobras has a complex history with Brazil’s government. As a state-controlled company, it plays a critical role in the nation’s economy.
Over the years, it’s faced various legal and financial challenges. One of the most notable was Operation Car Wash, a corruption investigation that began in 2014.
This scandal damaged the company’s reputation and led to changes in its governance.
Brazil itself has been striving to balance its budget. Its public debt has been a concern for many economists.
President Lula’s administration is pushing for financial reforms to enhance revenue streams. These efforts coincide with Petrobras’s own financial scrutiny.
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