Tax Reform: fuel prices are uncertain – 07/07/2023 – Market

Business entities even expressed fear of rising fuel prices with the Tax Reform, but specialists say that the behavior of prices is still uncertain based on possible changes in legislation.

According to them, the scenario depends on definitions such as the level of the rates on these items. They are not yet defined and should be fixed at a later stage of the reform, by means of a complementary law.

“The reform was announced in general lines. We have to wait for the complementary laws that will regulate the sectors, including fuel”, says economist Carla Beni, professor of MBAs at FGV (Fundação Getulio Vargas).

“As it is something that will not be done now, we cannot project [os preços]”, he adds.

The Chamber of Deputies approved at dawn this Friday (7) the Tax Reform, which unifies five taxes on consumption. The text now goes to the Senate for consideration.

The proposal provides for the merger of PIS, Cofins and IPI (federal taxes), ICMS (state) and ISS (municipal) into one IVA (Value Added Tax). The transition from the current system to the new one is not immediate, and should take place over ten years.

If it is also approved by the Senate, the new model will be dual. It means that a portion of the tax rates on goods and services will be administered by the federal government through the CBS (Contribution on Goods and Services), and the other, through the IBS (Tax on Goods and Services), by states and municipalities.

The fuel and lubricants sector is one of those that will have specific rules for collecting the new taxes, with the aim of maintaining the current load. The new system institutes rates valid for the entire national territory, varying according to each fuel.

The rates must be collected in a single phase of the chain, with the possibility of granting credits to taxpayers.

“The price of fuel will be connected with the rates. We had expressions of associations reporting an increase in taxation. It is a concern that I have, but there is no certainty of how this cost will be, because we do not have established rates yet”, says the lawyer tax lawyer Pedro Schuch, partner at SW Advogados.

“Many aspects of the reform will be defined by a complementary law. This is one of them”, he adds.

Economist Robson Gonçalves, professor of MBAs at FGV, has a similar opinion. He also assesses that it is necessary to wait for the definition of the rates on fuels to project the behavior of prices.

“Saying that there will certainly be an increase, of that order of magnitude or that, is not something you can stick with now”, he says.

In a note released on Thursday (6), the IBP (Brazilian Institute of Petroleum and Gas), representative of the sector, declared that the text of the reform was “reason for concern”. For the entity, the proposal would lead to a “strong high” with the possible accumulation of tax on operations.

This Friday, after the approval of the reform by the Chamber, the entity changed its tone. In a new statement, the IBP stated that the text “meet the demands of the oil and gas sector”, removing the cumulativeness of the IBS for fuels and natural gas.

“In this way, the risk of rising prices of derivatives and natural gas due to the accumulation of credits is avoided”, said the institute. The IBP congratulated the Executive and the Legislative for the approval, but stated that it still has “concerns” regarding some points of the proposal.

Throughout the discussions on the text, the CNT (Confederação Nacional do Transporte) also manifested itself on the subject. On June 20, the entity stated that one of its main concerns was the incidence of tax on transport sector inputs, including fuel.

“If the idea of ​​a single rate for goods and services prevails, there will be a heavy increase in taxes on strategic sectors in Brazil, including transportation,” said the director of institutional relations at the CNT, Valter Luís de Souza, at the time.

The entity, however, declared in the same statement that the reform is “fundamental to enable more solid economic growth”.

Tax lawyer Rodrigo Pinheiro, partner at Schmidt Valois Advogados, says that specialists and organizations are still working on the reform, seeking to understand the content of the changes.

He also assesses that the impact on final fuel prices will depend on points such as the definition of rates.

“What was approved provides for a specific regime for the taxation of fuels, an exception to the rule, because the idea of ​​the reform was to provide for a treatment for all operations”, he says.