Changing the ICMS calculation basis increases fuel prices

Even with the MP (Interim measure), published on Monday (2)in which the new government extends, for two months, the exemption from Pis/Pasep and Cofins taxes on petrol, ethanol, aviation kerosene and methane (natural gas for transport), fuels are already leaving distributors with higher prices from day one of 2023.

This is due to a change in the calculation of rates ICMS (Tax on the movement of goods and services), a state tax. The provision which extended the exemption also resets the Cide rates (Contribution for Intervention in the Economic Area) of operations with gasoline and derivatives.

THE Sincopetro (Retail Syndicate of Petroleum Derivatives of the State of São Paulo), representative of fuel retailers, informs that the impact on the value of petrol is R$ 0.0235 and on ethanol R$ 0.0354. Diesel is the fuel that has grown the most: the S500 type had an increase of R$ 0.2283, and the S10, R$ 0.2355. The calculations were carried out by Valêncio Consultoria, at the request of the union.

At service stations, according to a survey by the ANP (National Agency for Petroleum, Biofuels and Natural Gas), in the first week of 2023, between January 1 and 6, the average price of petrol increased by 3.2%, from R$ 4 0.96 to R $ 5.12 per litre.

Ethanol increased by 3.6%, from R$ 3.87 to R$ 4.01, in the first week of the year. Diesel posted a slightly smaller increase of 2.56%. The average value went from R$ 6.25 to R$ 6.41 per litre.

These products, in addition to biodiesel and LPG (liquefied petroleum gas), cooking gas, must pay, according to federal regulations, PIS (Social Integration Program), Pasep (Program for the training of assets of civil servants) and Cofins ( Contribution for the Financing of Social Security), taxes that finance social security (health, social security and welfare), projects aimed at a better distribution of income in the country, participation of civil servants in the revenue of public administration bodies.

Within states and the Federal District, fuels also pay ICMS, a tax that accounts for the bulk of these federal units’ collection. Last year, to try to contain the increase in the prices of these products, Jair Bolsonaro’s government has adopted measures to reduce and ease taxes, valid until December 31st. How after this deadline, the collection of the tax can already be normalizedresulting in higher costs for the consumer.

extension and agreement

One of the first actions taken by President Luiz Inácio Lula da Silva on Monday (2) was the publication of the PM no. 1.157/2023 in an extra edition of the DOU (Official Gazette), the extension of the PIS/Pasep and Cofins exemption on fuelsincluding imports. With this decision, the tax rates on diesel, biodiesel and methane for motor vehicles are canceled until 31 December of this year. With regard to petrol and alcohol, the exemption has been extended for 60 days, until February 28, 2023.

As for the ICMS, on December 14 the ministers of the STF (Federal Supreme Court) decided to maintain the essential product status for diesel, methane and cooking gas, in the judgment of direct unconstitutionality, ADI 7.191, and an accusation of non-compliance of a fundamental precept, ADPF 984.

With this, part of the intervention measures on taxes on these products, in force since the middle of last year, due to the rise in the dollar and oil, are no longer valid. Gasoline and ethanol were excluded from the decision, and could have ICMS rates above 18%, which will be discussed again in February. So far, no state has approved an increase.

As decided in the STF, the states and the Federal District have signed the ICMS agreement no. 199 which was published in the DOU on December 23, 2022, one day after the conclusion of the 364th extraordinary assembly of the Confaz (National Council for Financial Policies), linked to the former Ministry of the Economy.

This agreement concerns the ICMS tax regime on fuel operations, which is regulated by the complementary law n. ICMS, which replaces the multi-stage tax regime after 30 December 2022.

With this tax system, the ICMS on petrol, anhydrous ethanol, diesel, B100 (biodiesel) and LPG can only be charged when leaving the refineries. Thus, any other phase of taxation ceases, both at distributors, TRR (Transporter-Reseller-Retailer, companies authorized to purchase large quantities of fuel for resale) and resale stations, even in interstate sales. The goal is to facilitate inspection.

With the agreement, the states have also decided that, in operations with diesel, biodiesel and LPG, the ICMS tariff will be specific, i.e. an amount due per unit of measure sold. This unit should be uniform throughout the country, the liter for diesel and biodiesel, and the kilogram for cooking gas (LPG), informs Confaz. Previously, rates were a percentage of the price.

In chapter 2 of the agreement, the ICMS tariffs are set at R$ 0.9456 for diesel and biodiesel and at R$ 1.2571 for LPG/NGLNG (Liquefied Gas Derived from Natural Gas).

For other fuels, until 31 December 2022, the ICMS calculation basis continued to be the moving average of the PMPF (Weighted Average Price to Final Consumers) of the previous 60 months. But, according to Sincopetro, from 1 January 2023 the calculation basis on which the ICMS tariff is applied for each fuel has changed: it is no longer the average of the last five years, returning to being the average of the last 15 days. This is what is already driving prices up.

“This will generate a PMPF increase on all fuel costs, as well as fortnightly updates of values, with a major impact on the final price of the product at the pump,” warns the agency.

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