From exemption to full reimbursement: see how fuel taxes have ebbed and flowed since 2021 | Cars

From exemption to full reimbursement: see how fuel taxes have ebbed and flowed since 2021 | Cars
From exemption to full reimbursement: see how fuel taxes have ebbed and flowed since 2021 | Cars
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1 of 2 Pump nozzle for fuel supply at a Brasília station. — Photo: Reuters/Adriano Machado
Pump nozzle for fuel supply at a Brasília station. — Photo: Reuters/Adriano Machado

The Tax on the Circulation of Goods and Services (ICMS) will increase by 12.5% ​​on gasoline, diesel and cooking gas from this Thursday (1st). The measure, announced in October by the Finance Secretaries of the states and DF, marks the end of a process of fuel tax exemptions and refunds that has been going on since 2021.

From March of that year until February 2024, there were at least 13 important announcements of changes to taxes on gasoline, diesel, ethanol and natural gas (CNG) — seven in 2023 alone.

Fuels in Brazil have experienced intense back-and-forth taxation as a way to contain rising consumer prices and reduce the impact on inflation. The movements intensified during the Covid-19 pandemic and after the outbreak of war in Ukraine, which increased the costs of both oil and the final product at the country’s gas stations.

With the support of the National Federation of Fuel and Lubricant Commerce (Fecombustíveis) and Amance Boutin, fuel specialist at Argus, the g1 prepared a timeline with the main fuel tax changes over the last three years.

The survey shows chronologically the movement of exemption from March 2021, followed by the intensification of measures in 2022 — the year of presidential elections — and by return of tax incidencelittle by little, throughout 2023.

The timeline also shows that it is common for Petrobras to adjust fuel prices at refineries on the same day (or on similar dates) as changes in taxation. These changes usually compensate for the increase or decrease in taxes, with impacts on final prices. According to experts, this is a movement already predicted by the market. (understand below)

See below the main changes over the last three years:

2 of 2 Trajectory of fuel taxes. — Photo: Kayan Albertin/Editoria de Arte g1
Trajectory of fuel taxes. — Photo: Kayan Albertin/Editoria de Arte g1

What explains this back and forth in taxation?

According to Amance Boutin, fuel expert at Argus, the volume of tax changes in the last three years is an atypical movement, both in relation to the frequency of changes and the duration of each one. (see details of the changes below)

The Lula administration, which took office in 2023, began a reimbursement process, in an attempt to replace the losses caused by exemptions in previous years and increase federal revenue.

The recovery occurred gradually throughout the year, as the increase in fuel taxes — and the consequent increase in pump prices — are measures considered unpopular.

This entire context resulted in a much more intense volume of price fluctuations than usual. For Boutin, from Argus, the movements, especially in 2023, are the result of two main factors:

➡️ 1. The need for the federal government to reestablish a tax burden that was strongly reduced under the previous government.

“This movement was spread over a year [2023] to avoid generating a sudden price increase at the pump and to respect constitutionality rules”, he explains. “Certain taxes cannot be changed in the same calendar year and need to be decided in the previous year.”

“This change has always been a request of the large distributors: to put an end to fraud made possible by the complexity of the tax model and the differences in rates between states”, he says.

See list of the best-selling new vehicles in Brazil in 2023

The timeline also shows that almost all changes in taxation are accompanied by adjustments in fuel prices by Petrobras at refineries. This movement is quite common, points out Amance Boutin.

“There is a correlation between the adjustments made by Petrobras and changes in taxation. This analysis is consensual among market participants [importadores, distribuidores e revendedores]”, it says.

According to the expert, these participants tend to anticipate and plan according to the risks and opportunities created by changes.

“In practical terms, many increased their diesel stocks [sem adição de biodiesel] and biodiesel before the turn of the year to have an accounting gain with the complete re-encumbrance of PIS and Cofins on these two products from January 1st”, he states.

“In the market’s view, this coordination is, indeed, a way of guaranteeing a certain stability in prices at the resale end.”

Are there any new changes expected in 2024?

According to Fecombustíveis, there are no more federal taxes to return on fuels after the ICMS adjustment this Thursday (1st) — except LPG (liquefied petroleum gas), which remains zero in PIS/Cofins.

Amance Boutin, from Argus, reinforces that, although there are no major changes planned for the short term, changes to tax values ​​in the ad rem model (those with a fixed value per liter or kg of fuel) can still be applied.

“This must occur in each tax, especially in the case of ICMS”, he concludes.

Gasoline price rises 12.5% ​​at stations in 2023

See the ebb and flow of fuel taxes since 2021

➡️ May 1, 2021 – The PIS/Cofins rates for diesel oil A (without the addition of biodiesel) are returned. The impact, according to Fecombustíveis, was a increase of R$ 0.3163 in diesel oil B (with biodiesel mixture).

➡️ March 11, 2022 – Reduction to zero of PIS/Cofins rates for diesel oil A (without the addition of biodiesel) and biodiesel. The impact was a reduction of R$0.3312 in diesel oil B (with biodiesel mixture).

➡️ June 23, 2022 – Reduction to zero of PIS/Cofins and Cide rates for gasoline A (produced in refineries, without the addition of alcohol). The impact was a reduction of R$0.6869 in gasoline C (already mixed with ethanol, sold at gas stations).

➡️ May 1, 2023 – The ICMS on the diesel switched to the ad rem modality (charge with a single value on the quantity of liters), from BRL 0.9456 per liter, throughout Brazil. The result was an increase in the tax burden in most states. The average in the country was R$ 0.91/liter.

➡️ June 1, 2023 – The ICMS on Gasoline switched to ad rem mode, from R$ 1.22 per liter, throughout Brazil. The measure also resulted in an increase in the tax burden in most states. The previous average in the country was R$ 1.06/liter.

➡️ July 1, 2023 – Return of the incidence of Cide on gasoline A (produced in refineries, without the addition of alcohol), R$ 0.10 per liter, and increase in PIS/Cofins values ​​for BRL 0.7925 It is BRL 0.1309, respectively. The total of these taxes on gasoline C (already mixed with ethanol, sold at gas stations) was R$0.6869.

  • There was also an increase in PIS/Cofins values ​​for hydrated ethanol, in total R$ 0.2418/liter. The impacts were: increase in BRL 0.3384 in gasoline C and BRL 0.2218 in hydrated ethanol.
  • On that date, the incidence of PIS/Cofins on CNG also returned, at 9.25%.
  • On the same day, Petrobras reduced the price of gasoline to distributors.

➡️ September 5, 2023 – PIS/Cofins reimbursement for diesel oil A (without the addition of biodiesel) and biodiesel, according to R$0.1100 It is BRL 0.0463 per liter, respectively. The impact was a high BRL 0.1024 in diesel oil B (with biodiesel mixture).

  • There were no adjustments by Petrobras in the month.

➡️ October 1, 2023 – Increase in PIS/Cofins for diesel oil A (without the addition of biodiesel) and biodiesel, moving to R$0.1300 It is BRL 0.0555 per liter, respectively. The impact was an increase in BRL 0.0187 in diesel oil B (with biodiesel mixture).

➡️ October 4, 2023 – End of validity of the Provisional Measure that created the discount program for new cars and determined a partial increase in federal taxes on diesel. As a result, diesel oil A (without the addition of biodiesel) and biodiesel had PIS/Cofins zero until December 31, 2023. The reduction was BRL 0.1211 in the cost of diesel oil B (with biodiesel blend).

➡️ January 1, 2024 – PIS/Cofins reimbursement for diesel oil A (without the addition of biodiesel) and biodiesel, according to BRL 0.3515 It is BRL 0.1480 per liter, respectively. The impact was BRL 0.3271 in diesel oil B (with biodiesel mixture).

➡️ February 1, 2024 – Increase in ICMS for gasoline and diesel. The increases will be R$ 1.3721 per liter for gasoline and BRL 1.0635 for diesel and biodiesel. The impact should be an increase in BRL 0.1521 in gasoline C (already mixed with ethanol, sold at gas stations) and BRL 0.1179 in diesel oil B (with biodiesel mixture).

The article is in Portuguese

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