Vehicle being refueled at a gas station in the Capital.  (Photo: Marcos Maluf)

Items such as diesel, gasoline, electricity, are now classified as essential and indispensable

Vehicle being refueled at a gas station in the Capital. (Photo: Marcos Maluf)

President Jair Bolsonaro (PL) sanctioned with vetoes the project that limits the levy of ICMS (Tax on Circulation of Goods and Services) on fuel prices to 17%. Among the vetoed rules is the one that provided that, in case of loss of collection caused by the ICMS ceiling, the Union should compensate the states and municipalities.

According to the text approved, items such as diesel, gasoline, electricity, communications and public transport are now classified as essential and indispensable, which prevents states from charging a rate higher than the general ICMS rate, which varies from 17% to 18%, depending on locality.

Until then, the tax on these products reached up to 30% in some regions. The ICMS is the most important source of revenue for the states, which are required to transfer 25% of the collection to the municipalities. The states claim that the change will directly impact the budget. In one year, R$ 80 billion will be transferred to the country’s state coffers. For Mato Grosso do Sul alone, the impact would be R$ 1 billion.

Faced with this scenario, the Secretaries of State for Finance asked for full compensation for the losses in revenue that will result from the new rules, and a gradual implementation of the 17% tax ceiling for fuel, energy, communications and transport.

The Federal Supreme Court (STF), through Minister André Mendonça, gave the federal government, the Chamber and the Senate 24 hours to express their views on the proposal. But the request was in vain. From now on, states will only be able to charge 17% on fuel.

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