Tax reform allows fuel to be taxed with ‘sin tax’, but government rejects idea

[ad_1]

Ministry of Finance intends to maintain the current tax burden. Approved text could have a double impact on consumer prices and affect investments in Brazil, says sector. The tax reform approved by the Senate on Wednesday (8) allows fossil fuels, such as gasoline, diesel oil and cooking gas, to be taxed with the “sin tax”. But the government dismisses the idea and states that it should “maintain current taxation”. Called the “sin tax”, the selective tax aims to tax products considered harmful to the environment and health, such as cigarettes and alcoholic beverages, for example. “Sin tax” will be applied to products considered harmful, such as cigarettes. Pixabay During the text’s processing in the Senate, rapporteur Eduardo Braga (MDB-AM) allowed the extraction of oil and the sale of fossil fuels to be subject to this tax. The text returned to the Chamber of Deputies for analysis. Understand the main points of the tax reform, approved by the Senate To g1, the Ministry of Finance stated that, although the tax reform allows for extra taxation on fuels, “in principle the idea is not to use the IS [Imposto Seletivo]”. In place of the “sin tax”, the government intends to use the IBS (Goods and Services Tax) and the CBS (Contribution on Goods and Services) — created by the reform to replace current taxes. The ministry said that “the idea is to calibrate the rates per liter, in order to maintain the current taxation”. “In other words, there is no intention to increase fuel taxes in the Tax Reform. And, therefore, an increase in fuel costs is not expected, much less an increase in logistics costs due to the Tax Reform”, stated the ministry. Double impact If the selective tax is applied to fuels, the tax reform could have a double impact on the price of derivatives, according to experts consulted by g1. The text approved by the Senate included both oil extraction and fossil fuels in the list of activities and products that will be taxed by the selective tax. However, as fuels are produced from the refining of crude oil, the tax must apply twice in the production chain: on the extraction of oil and then on the refined input into gasoline and diesel, for example. “In fact, it will be something that will be costly. In my opinion, it will increase the tax burden and will most likely be passed on to the consumer”, said tax lawyer Marcos Campanatti, from the firm Souza Okawa. Braga’s report establishes taxation of up to 1% of the market value of oil. If this section passes through the Chamber and is sanctioned, a complementary law will be necessary to define the rate and reference value. According to the president of the Brazilian Oil and Gas Institute (IBP), Roberto Ardenghy, the tax on oil extraction must be passed on to the consumer. “As we are dealing with an input and a price that is included in taxation, you will immediately transfer this to the consumer, it will impact the entire chain until it reaches the consumer”, he stated. According to experts, tax should be passed on to the consumer. Reproduction/EPTV Competitiveness of Brazil Ardenghy also states that the tax should increase the sector’s costs by up to US$9.1 billion over a period of 27 years – the useful life of the production fields. The IBP estimate considers the price of a barrel of oil to be US$84. The cost of the 1% tax would be: US$3 billion in small projects; US$5.2 billion in medium-sized projects; US$9.1 billion in large projects. For the president of IBP, the forecast of taxing the sector in the tax reform could affect the attraction of investments and should already be taken into consideration by oil companies in the next oil auction of the National Agency of Petroleum, Natural Gas and Biofuels (ANP), in December. “International companies will think twice about coming to Brazil to make oil and gas investments when we place this type of taxation on oil production or exploration,” said Ardenghy. This tax of up to 1% will be charged regardless of destination, meaning it can also increase the price of the exported product. “This is a very important concern because we will be exporting taxes, which is something that goes against what the whole world does,” said Campanatti. Congress needs to approve Tax Reform this year, says Camarotti

[ad_2]

Source link