Understand the government’s decision to increase gasoline and ethanol taxes and see how much the price should remain

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Gasoline was re-charged by R$0.47 per liter, and ethanol by R$0.02 per liter. The announcement was made on Tuesday (28) by the Minister of Finance, Fernando Haddad. The government announced late Tuesday afternoon (28) the partial return of federal taxes on gasoline and ethanol. The reinstatement, implemented by means of a provisional measure, is already valid from this Wednesday (1st). The return is partial because taxes are not being resumed at the full amount they had previously. See below questions and answers about the measure and how much the price should be for the consumer. How much is the tax increase? For gasoline, the increase is R$ 0.47 per liter. In the case of alcohol, R$ 0.02 per liter. How much does this represent for the final consumer? According to calculations carried out by the Brazilian Association of Fuel Importers (Abicom), the price of gasoline at gas stations should rise by around R$ 0.25 per liter. That’s because, despite an increase of R$ 0.47 in federal taxes, Petrobras announced a reduction in the value of fuel sold to distributors. This reduction is R$ 0.13. The account made by Abicom also takes into account that gasoline sold to consumers has 27% ethanol. Ministry of Finance details return of federal tax collection on fuel Which taxes have been resumed? The government returned to charging PIS and Cofins, which had not been charged since May 2022. On that occasion, the previous government, of former President Jair Bolsonaro, suspended the application of taxes until the end of December 2022, with the goal of lowering fuel prices. Why are taxes being reinstated? In January, President Lula’s government signed a provisional measure extending the fuel exemption. In the case of gasoline and alcohol, this extension was valid until this Wednesday (1st). As a result, if the government did not enact the provisional measure, the values ​​would be fully recovered. Why did the government opt ​​for partial reinstatement? The partial reencumbrance was a middle ground solution found between the political wing and the economic wing of the government. The political wing did not want the impact of rising fuel prices on the consumer. The economic wing understands that the government cannot give up any longer the collection from taxes on gasoline and ethanol. How much would the increase be if the reenactment were complete? In this case, gasoline would rise by R$ 0.69 per liter. Ethanol would rise by R$ 0.24 per liter. How does the government intend to complement the collection, since the resumption was partial? In order to preserve the collection, since the tax refund was partial, the government is going to create a tax on the export of crude oil. The rate will be 9.2%. The expectation is that the new tax will collect R$ 6.7 billion in the four months in which it takes effect. It focuses on companies that export crude oil in the country, including Petrobras. Is any fuel still exempt from federal taxes? The government informed that vehicular natural gas (GVN) and civil aviation kerosene, fuels that were also expected to be re-encumbered as of March 1st, will remain exempt. What were the minister’s arguments for reinstatement? Haddad stated that the re-encumbrance of fuels has a “very clear objective” of “recomposing the public budget”. The economic team wants to convey an image of fiscal responsibility. The minister argued that the exemption, applied by the previous government, was an electoral measure, which was only extended by President Lula because the exemption could inflate the January coup acts. Haddad also said he hoped that, given the reencumbrance, which strengthens public accounts, the Central Bank would lower interest rates. “Measures are focused on the fall of interest rates in Brazil,” said Haddad. “We hope that Copom reacts as foreseen in the minutes of the Central Bank”, he added.

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