Lula sanctions law to compensate states and municipalities for ICMS losses

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ICMS, one of the main sources of revenue for states and municipalities, was reduced in 2022, under the Jair Bolsonaro government. Federal government will anticipate R$ 10 billion in 2023. President Luiz Inácio Lula da Silva sanctioned this Tuesday (24) a law that guarantees compensation to states and municipalities for the loss of revenue from the Tax on Circulation of Goods or Services (ICMS ). The ICMS was lowered in 2022, a measure taken by the administration of former president Jair Bolsonaro. According to the government, states and municipalities will have their revenue restored to R$27 billion. Of this amount, the government promised to bring forward the payment of R$10 billion, which would be deposited in 2024, for this year. Of the total R$10 billion, R$2.5 billion will be allocated exclusively to cities and the rest will be transferred to the states. Senate approves billion-dollar compensation to states and municipalities for ICMS losses on fuels. In addition to this transfer, the federal government also intends to pay municipalities an extra portion of the Municipal Participation Fund to compensate for the drop in revenue over the last three months. The total resources that would be transferred to the cities would be R$2.3 billion. “We will increase the transfer to state and municipal participation funds to recover revenue losses in 2023. With this, we will ensure that no municipality will lose any revenue in relation to 2022. This means that we will guarantee municipalities the same amount of money. To the states, we will guarantee the recovery of revenue losses in the months of July and August 2023”, said Lula in a video posted on a social network.

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