ICMS: Union negotiates compensation in installments to states – 02/07/2023 – Market

Compensation from the Union to the states for losses in the collection of ICMS (Tax on Circulation of Goods and Services) on fuels can be made in installments until 2026, the last year of the mandate of President Luiz Inácio Lula da Silva (PT) and the current governors .

The staggered replacement of values ​​received a positive signal from the heads of state executives after a request from the Minister of Finance, Fernando Haddad (PT), in a meeting this Tuesday afternoon (7).

The value to be compensated, however, remains an impasse. As revealed to Sheet, the Treasury’s initial estimates pointed to an invoice between R$ 13.2 billion and R$ 36.9 billion, depending on the chosen calculation criteria. The states, in turn, speak of a higher value, of up to R$ 45 billion.

A new meeting between the secretary of the National Treasury, Rogério Ceron, and the state finance secretaries will take place this Wednesday (8) to try to advance the negotiations.

“There is already a guideline that the federal government wants to carry out the recomposition, it asked that this recomposition could be carried out within this mandate period, the next four years, and it will discuss an average between what we think is the loss, of BRL 45 billion, and the ordinance made in the government of President Bolsonaro, which pointed to BRL 13 billion”, said the governor of Espírito Santo, Renato Casagrande (PSB).

According to him, the correct value must be a “median position” between these two calculations.

The Ministry of Finance asked that the compensation be spread over four years due to concerns about the impact of these amounts on public accounts. Although some state governments can reduce the amounts of their debt with the Union, those that do not have any debt must receive direct transfers from the federal government.

The governor of Rio Grande do Sul, Eduardo Leite (PSDB), was receptive to the escalation proposal, but was more cautious about the deadline. According to him, there is discussion about whether the compensation will take place “over the course of this year, two years, three years, or even the entire mandate”.

“The states demonstrate willingness in this scaling. I don’t know if it is possible to reach four years, possibly it has to be a shorter period. But we also know that one thing is for the Union to discuss compensation in cash, another is to discuss it in six months, another in two years. The Union has its own fiscal challenges,” he said.

The payment of compensation by the Union to the states is one of the main impasses at the beginning of the government of Luiz Inácio Lula da Silva (PT).

The new administration has intensified negotiations to end the stalemate. In December, the STF (Federal Supreme Court) gave the Union and states a period of 120 days to reach an agreement.

The fight began when former president Jair Bolsonaro (PL), who maintained a bellicose relationship with the governors, obtained support in Congress to approve a law that standardized the ICMS rate on gasoline, diesel and ethanol. The text entered into force in March 2022, with the aim of reducing fuel prices in an election year.

State tax was levied at a fixed amount per liter (“ad rem”) instead of a percentage. The measure had a billionaire impact on the states’ cash flow.

Three months later, a second law was approved providing compensation to states that had losses greater than 5% in tax collection, but the wording of the norm left room for different interpretations. The way to calculate this repair is the main target of disagreements.

States advocate estimating compensation specifically for each fuel and making full reimbursement to all states, within or outside the tax recovery program for debtors. Thus, the 5% trigger would apply to everyone and trigger the payment of all damages — not just the excess of that percentage, as defended by the Union.

The secretaries also want the losses in 2022 to be estimated on the basis of 2021 corrected for inflation. Without this update, according to them, few states would trigger the compensation trigger, since tax revenues rise naturally, accompanying the price level.

The device of the law, however, speaks of compensation for the loss “that exceeds the percentage of 5% in relation to the collection of this tribute in the year 2021”. The Union’s interpretation is that the repair should include only the loss exceeding the 5% drop, calculated on the nominal value of the previous year’s revenues, since the text does not mention monetary correction.

The federal government still understands that the estimate must be made on the ICMS as a whole, globally.

The Union disagrees with several of the states’ claims, but may end up meeting one or two items in order to accelerate the outcome of the agreement. The guideline is to verify which of these points would have the least impact on the federal government’s coffers.

For the federal government, the fair value would be between R$ 13 billion and R$ 16 billion, but the outcome will depend on seams with the states.