Fux releases ICMS collection on energy transmission and distribution

Minister Luiz Fux, of the Federal Supreme Court (STF), authorized the states to resume the collection of ICMS on electricity transmission (TUST) and distribution (TUSD) tariffs.

The decision, of Thursday (9), is preliminary and responded to the request of the National College of Attorneys General of the States and the Federal District (Conpeg), which filed a Direct Action of Unconstitutionality (ADI) against the end of ICMS collection.

The issue must be judged by all the ministers of the STF between February 24 and March 3, in the virtual plenary – a system in which votes are deposited in writing, without oral support.

The return of the tax will increase the electricity bill and represents yet another pressure on inflation, which from the beginning of March should also reflect the impacts of the return of the collection of federal taxes on gasoline, ethanol, vehicular natural gas (CNG) and aviation kerosene. In gasoline, for example, the full resumption of PIS and Cofins should cause a price increase of at least R$ 0.69 per liter.

Law supported by Bolsonaro had eliminated ICMS on energy transmission and distribution

The collection of ICMS on these two tariffs had been eliminated by Complementary Law 194, sanctioned in June 2022. This law, supported by the government of Jair Bolsonaro (PL), is the same that established a ceiling for the state tax on fuel, energy electricity, communications and public transport by declaring them essential goods and services.

In his decision, Fux cites an estimate that the states will stop collecting about R$ 16 billion every six months, “which could also have an impact on the collection of municipalities, since the Federal Constitution determines that 25% of the revenue collected with ICMS by the states should be passed on to the municipalities”.

For the minister, there is a possibility “that the Union has exorbited its constitutional power, interfering in the way in which the member states exercise their tax competence in relation to the ICMS”.

In December, the Union and the states signed an agreement in an attempt to end the tussle over complementary laws 192 and 194, which changed the ICMS collection system. This agreement, mediated by STF Minister Gilmar Mendes, was approved by the plenary of the Court.

Some points, however, remained unresolved and would be the subject of new discussions this year, such as the ceiling on gasoline ICMS, compensation for loss of revenue by the states and the issue of tax on electricity distribution and transmission tariffs – a topic of Fox’s decision.

With change of command, governors press for compensation

With the change of government in the Union and in several states, governors have been putting pressure on the federal government and the STF to overthrow or modify these two complementary laws, with the argument that they cause billions of revenue losses.

In the states as a whole, ICMS collection fell by almost 8% in 2022, leading to a 4.7% drop in total tax revenues, which ended the year at R$ 680.2 billion, according to “Valor Econômico” .