States raised BRL 65.4 billion with fuel and energy in 2022

State revenue from the Tax on the Circulation of Goods and Services (ICMS) from fuels in the first months of 2022 increased by 36% compared to last year.

Data from the National Council for Finance Policy (Confaz) show that, from January to April, the states collected R$ 41.5 billion with the tax, which corresponds to an average of 18% of the total ICMS collection.

The variation is well above inflation, even with the ICMS rates on fuels frozen since November.

The tax levied on electricity has so far generated revenue of BRL 23.9 billion, an increase of 12.92% compared to the same period in 2021.

Added to fuel, the total revenue reaches R$ 65.4 billion.

The amount may be higher, as some states, such as Rio de Janeiro, have not yet delivered data for the month of April to Confaz.

The ICMS on fuels and electricity are in the sights of the president of the Chamber, Arthur Lira, who intends to put to a vote next week a project that applies a ceiling of 17% to the rates.

In some states, the percentage exceeds 30%.

Losses could reach R$ 70 billion

The measure is not a consensus among experts, who predict significant losses from one of the main sources of revenue for states and municipalities.

In 2021, ICMS on fuel and electricity accounted for BRL 178.9 billion of the BRL 652.4 billion collected.

Calculations by economist Sérgio Gobetti, a specialist in public finance, indicate that the measure may withdraw R$ 70 billion from the coffers of states and municipalities.

“There is no doubt that the ICMS on fuel and energy is high, but the fiscal impact for states and municipalities of such an abrupt reduction is very large and, therefore, caution is required. In the short term, there is no way to compensate the states for such a significant loss. The way forward would be, in the medium term, to pass a reform that makes the tax burden more uniform,” he explains.

For the specialist in public accounts, Murilo Viana, the poorest states may be the most affected with the proposed ceiling.

“Locations with a less developed economic base are the most dependent on transfers from the Union, such as the State Participation Fund (FPE) and, in the case of ICMS, the collection resulting from fuel and electricity. In Tocantins, for example, the ICMS on fuel represents about 30% of state taxes, while in São Paulo it is only 10%. Despite São Paulo having a gigantic nominal revenue, with R$ 21 billion last year, the state is proportionally less dependent on this source of revenue”, he says.

Lira’s project comes on the heels of a government offensive to stop price increases in an election year. This Thursday (20), governors met at Confaz to discuss changes in ICMS on diesel.

A decision by Minister André Mendonça, of the STF, gave the government a victory over the states in the discussion on the single rate for fuel.

The governors intend to ask for more time to present a defense to the minister.