House Committee endorses text that seeks to maintain competitiveness of biofuels

The Constitution and Justice Committee (CCJ) of the Chamber of Deputies approved this Monday (20) the admissibility of the Proposed Amendment to the Constitution (PEC) that seeks to ensure the competitiveness of the use of biofuels – such as ethanol – against fossil fuels. – such as gasoline and diesel -, based on the differentiation of the tax burden of the products.

The text provides for the maintenance of a lower rate for taxes such as PIS/Pasep, Cofins and ICMS levied on ethanol, for example, in comparison with taxation on fossil fuels.

“The PEC aims to consolidate in the Magna Carta the tax differential between these products, to preserve the competitiveness between the biofuel and its fossil competitor, especially at a time when proposals to change the tax burden applied to fuels in Brazil are being discussed. The measure, in addition, strengthens, at the international level, the country’s strategic position, as a reference in the use of clean and renewable energy in the transport sector”, wrote the rapporteur, deputy Danilo Fortes (União Brasil-CE).

“To be competitive, ethanol now has lower rates compared to gasoline and diesel. like the PLP [projeto de lei 18/2022 em tramitação no Congresso] will reduce taxes throughout the country, and the ICMS on ethanol is lower than the 17% ceiling, the PEC aims to ensure that the tax differential remains in force in the country”, informed the deputy’s advisory, in a note.

According to the proposal, for 20 years, the tax difference should be maintained even if there are changes in relation to the rates of fossil fuels.

Also according to the text, proportionality must be maintained even in the face of judicial decisions or legislative and state proposals that change the rates of fossil fuels.

Until the complementary law on the subject comes into force, the competitive advantage of biofuels in relation to fossil fuels will be guaranteed by maintaining, in percentage terms, the difference between the rates applicable to each fossil fuel and to the biofuels that are substitutes for it, in level equal to or higher than that in effect on May 15, 2022.

When the competitive differential is not determined by the rates, it will be guaranteed by maintaining the difference in the effective tax burden between the fuels.

The proposal has the support of ethanol producers, who calculated losses in the sector from the approval of the ICMS limitation on this item.