Senate approves bill to reduce ICMS on fuels with compensation to states

The Federal Senate approved, this Monday (13), the bill that limits the Tax on Circulation of Goods and Services (ICMS) on fuels.

There were 65 votes in favor of the basic text, against 12 votes against and zero abstentions. The text now returns to the Chamber of Deputies.

PLP 18 defines that fuels — as well as energy, public transport, natural gas and communications — are essential and indispensable goods. As a result, state governments cannot charge ICMS on these items above the 17% ceiling established by the text.

ICMS is levied on the circulation of goods and on the provision of interstate and intercity transport and communication services. It is the most important source of revenue for the states, which are obliged to transfer 25% of the collection to the municipalities.

For states that have a loss of revenue in the year 2022 above 5% of what they collected in 2021, the federal government will bear the surplus. This surplus value will be deducted from the debts of the affected state with the Union. This compensation will be valid until December 31 of this year.

Federated entities should not be obliged to follow a determined ICMS rate in order to respect the autonomy of the states and the Federal District, but this rate cannot exceed 17%.

For states without debt to the Union, compensation will be made in 2023 with funds from the Financial Compensation for the Exploration of Mineral Resources (CFEM). These states will still have priority in borrowing in 2022.

Compensation will also be allowed through adjustments with loans already made with other creditors, with the guarantee of the Union. This compensation will be valid until December 31 of this year.

The bill’s rapporteur, Senator Fernando Bezerra Coelho (MDB-PE), included in his opinion the forecast that the Broad National Consumer Price Index (IPCA), one of the main measures of inflation in the country, be taken into account in the calculation. of the amount of compensation to be distributed to the states by the Union. The senator had already presented his first version of the vote in plenary.

The changes were made based on discussions that took place over the weekend with the federal government, states and Senate leaders, as well as suggestions for changes filed by several senators. In all, 77 amendments were presented to the project as approved by the Chamber of Deputies.

According to Bezerra, the States’ Net Current Revenue (RCL) increased by R$ 58.3 billion in the first four months of 2022, compared to the first four months of 2021, equivalent to a 21.8% increase. In 2021, the states’ RCL totaled BRL 877.9 billion in 2021, he said.

He evaluated that, even in a less optimistic scenario, the RCL of the states could reach R$ 967.4 billion in 2022.

“In another perspective, which also considers the expenditure side, according to fiscal statistics published by the Central Bank, states and municipalities accumulated a primary surplus of R$62.3 billion in the first four months of 2022 and R$126.6 billion in the first quarter of 2022. last 12 months to April. Therefore, from all angles of analysis, the thesis that states and municipalities can withstand the impact of this project seems quite plausible,” he added.

For Bezerra, therefore, it also makes no sense to create another means of compensation in parallel to what the project already brings.

The rapporteur also did not accept the request of governors for there to be a temporal staggering in the reduction of ICMS on products.

Even so, the IPCA issue was not the only change promoted by Fernando Bezerra.

Its project report went on to predict that, in addition to gasoline, as advocated by the federal government, the PIS/Pasep, Cofins and Cide rate on hydrated fuel alcohol and anhydrous alcohol added to gasoline will be zeroed by December 31, 2022. Previously, the first version of the opinion provided that the ethanol exemption would be valid until June 30, 2027.

Bezerra also plans to zero certain federal taxes on natural gas, crude oil and inputs for their manufacture.

The states will have to transfer the ICMS portion to the municipalities in proportion to the deduction of debt contracts backed by the Union, as well as in proportion to the appropriate CFEM portion, says the bill.

According to the Constitution, 25% of the total collected with ICMS in the states must be shared between the respective municipalities.

The text foresees that the compensations made to the states and municipalities are destined, in the constitutional proportion, to the Fund for Maintenance and Development of Basic Education and Valorization of Education Professionals (Fundeb) and the health floor.

PT and minority leaders advised against approving the project. They oriented in favor of PL, Progressives, Citizenship, PSC, Republicans and Network, in addition to the government leadership in the House. The leaders of the MDB, PSD, Podemos, PSDB, União Brasil, Pros, the opposition and the women’s bench released the benches.

Normally, the Senate does not have deliberative sessions in the plenary on Mondays, especially on a week with a holiday. But the government’s base has made an effort to pass the bill through Congress in the hope that it will effectively reduce prices at gas stations for end consumers ahead of elections in October this year.

The approval of the project was seen in the Senate as a victory for the government of President Jair Bolsonaro (PL). Even so, the governing parties were not so confident about the score at the beginning of the session and, during the afternoon, they called the opposition to talk and try to negotiate.

Criticism of the text did not come only from opponents. Privately, representatives of important parties were suspicious of the practical effects of the project, especially at the fuel pumps.

This Monday, the participation of senators in person was small in the plenary, but the articulators of the economic team were present and tried to reduce, as much as possible, the impact of the measure on the federal coffers.

The bill had its content modified by the senators and, therefore, will need to return to the Chamber of Deputies, where it had been approved at the end of May, for a new vote by the federal deputies.

Highlights analysis

One of the highlights – a suggestion to change the approved basic text – of an amendment presented by Senator Eduardo Braga (MDB-AM) was approved in the plenary by 45 votes in favor and 26 against.

The amendment determines that, in case of loss of resources caused by the reduction of ICMS on fuels, the Union will compensate the other entities of the Federation so that the constitutional minimums of health and education and Fundeb are maintained in comparison with the situation in force before of the eventual complete approval of the project.

It also provides that the states, the Federal District and the municipalities that receive compensation or benefit from other certain measures provided for in the project must maintain the proportional execution of minimum constitutional expenditures in health and education, including the allocation of resources to Fundeb, in the comparison with the situation in force previously.

Conversations to amplify the value of gas allowance

Fernando Bezerra also said he was studying to include the expansion of the value of the gas aid in PEC 16/2022, the so-called PEC for fuels, also reported by the senator, with no set date to be voted on. But, for that, it depends on negotiations with the Attorney General’s Office (AGU) and other members of the federal government.

This is because he has already been alerted by the AGU that there are legal risks of creating, extending or expanding income transfer programs in an election year.

“Specifically regarding the expansion of the value of the gas aid, taking into account the high importance of the matter and the social scope of this program, which already exists, we are negotiating with the AGU and the government, a legal solution so that the measure for this purpose enters the PEC 16/2022, authored by Senator Portinho, which will be reported by me”, he announced.

With a bimonthly payment, the gas allowance was R$ 51 in April this year.

Biofuels PEC

Another proposal on this Monday’s Senate agenda is PEC 15/2022, also reported by Fernando Bezerra Coelho. The text provides tax benefits for clean energy sources for at least 20 years.

The PEC provides for the creation of a favorable tax regime for biofuels, which would depend on the approval of a complementary law by the National Congress. Under the proposal, rates on renewable sources would be lower than those for fossil fuels.

The rule would be valid for at least 20 years and would apply to the following taxes: Contribution to the Financing of Social Security (Cofins) paid by the company on revenue or billing and by the importer of goods or services from abroad; Contribution to the Programs for Social Integration and Formation of Public Servant Assets (PIS/Pasep) and Tax on Circulation of Goods and Services (ICMS).

*With information from the Senate Agency