Gasoline tax reissues impasse between Haddad and PT’s political wing

President Luiz Inácio Lula da Silva (PT) has until the beginning of next week to decide whether to resume the collection of federal taxes on gasoline and ethanol, in the midst of an impasse that opposes the economic team, led by the Minister of Finance, Fernando Haddad, and allies that make up the so-called political wing of the government.

Federal taxation on fuels has been suspended since last year, when then-president Jair Bolsonaro (PL) sanctioned Law 14,352/2022 with the aim of reducing consumer prices of oil products. Proposed and approved on the eve of the beginning of the electoral campaign, the text established the exemption only until the last December 31st.

On January 1st, Lula signed a provisional measure (MP) that maintained the exemption from PIS, Cofins and Cide Combustíveis on products. The exemption on gasoline and ethanol was extended for two months – therefore, until February 28 –, while diesel and cooking gas are free from federal taxation until December 31, 2023.

According to behind-the-scenes reports published in the press, ministers and parliamentary leaders, in addition to the PT leadership, defend that the zero rate of taxes be extended once more. They fear a deterioration in the government’s image and the effect of the resumption of taxation on inflation, already projected by the market above the ceiling of the target for this year.

For this group, the exemption could be maintained until Petrobras changes the price formation policy for petroleum derivatives, in order to reduce fuel prices practiced in refineries. Thus, the repeal of the exemption would generate less impact.

Indicated by Lula, the company’s current president, former senator Jean Paul Prates, is in favor of ending the import parity price policy (PPI), according to which the state-owned company defines the value of fuels based on the international price of the oil, dollar-based.

Haddad, in turn, considers the immediate return of taxes necessary to raise revenue. In the fiscal adjustment package announced in January, he included the end of tax relief as of March as a measure responsible for guaranteeing BRL 28.88 billion in revenue by the end of the year.

The resource would help alleviate the primary result forecast, estimated at a deficit of BRL 231.55 billion in the 2023 Budget. For comparison purposes, the increase in the minimum wage to BRL 1,320 as of May 1st should cost the public coffers BRL 5.6 billion, while the readjustment of 7.8% for civil servants, with an additional BRL 200 of food stamps, around BRL 11.2 billion.

On Thursday (23), during a press conference at the presentation of the results of the January federal collection, the head of the Federal Revenue’s Center for Tax and Customs Studies, Claudemir Malaquias, said that “the reencumbrance is foreseen in accordance with the rule in force ”.

Economist Tiago Sbardelotto, from XP Investimentos, considers it important to increase the cost of fuel as a way of reducing the projected fiscal deficit for 2023. “We already had the return of PIS/Cofins in our account”, he says.

This Friday (24), the president of the PT, Gleisi Hoffmann, made her position known in a series of posts on Twitter. She declared that she was not against fuel taxation, but that ending the exemption at this time would “penalize the consumer, generate more inflation and fail to fulfill her campaign commitment.”

“Before talking about resuming fuel taxes, it is necessary to define a new price policy for Petrobras. This will be possible from April, when the Board of Directors is renewed, with people committed to rebuilding the company and its role for the country”, he wrote.

The final decision on the dilemma rests with Lula. The dispute repeats the situation that occurred in the last week of 2022, on the eve of inauguration, when Haddad – already announced as future minister – defended the end of the exemption. The decision to extend the benefit was defended by the political nucleus of the PT, led by Gleisi and by the current president of the National Bank for Economic and Social Development (BNDES), Aloizio Mercadante.

At the time, the misunderstanding came to light with a series of information mismatches. On December 27, several newspapers published the information that Haddad had sealed an agreement with his predecessor, Paulo Guedes, to edit an MP maintaining the exemption on fuels for another 30 days.

On the same day, the current minister’s communication team declared that there would be no extension at that time. According to the newspaper “O Globo”, he would have spoken with Lula on the subject and, subsequently, backtracked on the agreement with Guedes.

“I took a request that the current government refrain from taking any measure that may impact the future government, especially on issues that can be decided without incidents. So that we can soberly calculate the impact, verify the trajectory that we expect for the public accounts in the coming years”, said Haddad to the publication at the time. “He (Guedes) replied in the affirmative.”

The request was criticized by the then Minister of Mines and Energy, Adolfo Sachsida. “The PT government chose not to extend the exemption from federal fuel taxes,” said the economist in a video posted on a social network on December 29.

On January 1st, however, among the first MPs edited in the current government, Lula extended the exemption, postponing the decision on the resumption of tax collection until the end of February.

According to “Valor Econômico”, the Minister of the Civil House, Rui Costa, has not yet taken a side in the discussion. According to interlocutors interviewed by the newspaper, he would be observing “technical and political aspects of the measure” to help Lula make a decision.