ICMS: States lose R$ 16 billion in the 1st quarter of 2023 – 04/26/2023 – What is this tax

Exemptions promoted by the federal government and Congress last year contributed to lowering state revenues in the first quarter of 2023.

There was a 3.25% decrease in revenues compared to the same period of 2022, according to the Confaz State Tax Collection Bulletin (National Council for Finance Policy). This represents a loss of BRL 7 billion.

The data does not consider the impact of inflation, which would further increase the loss.

Revenues from ICMS (Tax on Circulation of Goods and Services), the main state tax, fell 9.4% in the same comparison, a loss of R$ 16 billion. As a result, the share of this tax in total collection increased from 80% to 75%. Collection with other taxes —such as IPVA, ITCD and fees— grew in the same period.

Several states increased the general ICMS rate to cover the gap in revenue left by the tax reduction approved in 2022. Most of the increases began to take effect in March of this year.

The biggest drops are in the ICMS of segments affected by the exemption carried out on the eve of the presidential elections. The amount collected fell 50% in electricity bills, 39% in communication services and 28% in relation to fuel. In this last segment, there was a loss of almost R$ 10 billion.

There was an increase in revenues with the same tax in relation to wholesale trade (+4%), retail (+9%) and transport services (+16%).

In São Paulo, for example, the collection of this tax fell 12.4% in the quarter in real terms (with data updated by inflation). On the other hand, there was an increase of 25% in IPVA revenue, 8.5% in ITCMD and 12% in fees, according to data from the State Secretariat of Finance and Planning. Total tax revenue shrank by 13.4%.

“The set of March collection indicators reflects a general negative performance, both in relation to short-term indices and trend indicators”, says Sefaz-SP.

In Rio Grande do Sul, ICMS collection dropped 17.6% in real terms. “The result was strongly influenced by the reduction in the rates of the so-called ‘blue chips’, which comprise the segments of fuel, electricity and telecommunications”, says the State’s Secretary of Finance. These rates were reduced by state decree from 30% to 25%. Later, by federal law, it increased from 25% to 17%.

Part of the ICMS resources is shared with the municipalities, and a portion of the collection is obligatorily destined for education and health.

PRESENT LINK: Did you like this text? Subscriber can release five free hits of any link per day. Just click the blue F below.