For specialists, the rise in gasoline with the new ICMS is certain

The entry into force of the single and fixed rate of the Tax on Circulation of Goods and Services (ICMS) should cause an increase in the price of gasoline. As of this Thursday (1st), the charge will be R$ 1.22 per liter throughout the national territory. Currently, the rates are proportional to the value and are defined by each state, generally varying between 17% and 20%.

The effects of the new ICMS on the price charged at the pump at gas stations are still unclear. The increase, however, is considered certain by economists. In Rio de Janeiro, for example, the charge is 18% and is currently around BRL 0.97 per liter if we consider the average resale price of BRL 5.38, recorded in the latest survey by the National Petroleum Agency. (ANP). In this case, if the difference is fully passed on to the consumer, the change would entail an increase of R$ 0.25 per liter.

“The increase is inevitable, because the value of R$ 1.22 cents per liter is higher than the average ICMS rate that the states practice today. I had access to calculations from specialists in the sector that vary from R$ 0.16 to R$ 0.20 the increase for the consumer at the pump”, says Pedro Faria, economist and researcher at the Center for Development and Regional Planning at the Federal University of Minas Gerais (Cedeplar-UFMG). He assesses that the change generates tax simplification and reduces the space for tax war between states.

Prices

In addition to taxes, other factors influence the final price charged by gas stations, such as sales prices at refineries, transportation costs and distributors’ profit margins. For this reason, there are variations in estimates. The ANP monitors the market but does not participate in price formation. There are no maximums, minimums, tables, nor the need for authorization for the transfer of readjustments to the consumer. “Prices are set by the market, by the agents that operate in it, such as refineries (part of Petrobras and part private), power plants, distributors and fuel stations”, informs the ANP.

The change in the collection of ICMS on gasoline was instituted by Complementary Law 192 of 2022. The value of fixed rates was defined in March of this year by the National Council for Finance Policy (Confaz). In the case of diesel, the change has been in force since May 1, with a charge of R$ 0.94 per liter.

Last week, the doctor of law, lawyer and professor at the Getúlio Vargas Foundation (FGV), Gabriel Quintanilha, had also scored in an interview with Brazil Agency that the new ICMS would cause the increase in gasoline prices. According to him, last year, during the processing of Complementary Law 192 of 2022, fuel prices were very high in Brazil and the fixed rate per liter was a solution presented to help reduce the fluctuation. However, the measure will be applied in a scenario different from the one that motivated the beginning of the discussions.

“The moment we are in today is exactly this: an ad rem, fixed rate, per liter of fuel, which will generate more revenue than an ad valorem rate, because the market reacted and the dollar is lower, as well as the oil price”, he analyzed. For Quintanilha, the fixed rate could be good for the consumer at the time it began to be discussed. On the other hand, the change will have a positive impact on the states, as it will increase revenue.

The Brazilian Institute of Petroleum, Natural Gas and Biofuels (IBP), which represents fuel distributors, has shown favorable to change. The legal and tax manager of the entity Mozart Rodrigues Filho told the Brazil Agency that the measure brings more clarity and simplification both for the final consumer, as well as for companies and states, which would have greater predictability of collection and easier detection of tax fraud.

Expected changes

Economist Pedro Faria recalls that, next month, there will probably be a new increase. On July 1st, federal taxes (PIS/Cofins and Cide) should once again be fully levied on gasoline and ethanol. His charge had been zeroed by former president Jair Bolsonaro last year, during the election period. Subsequently, the Lula government instituted a partial charge in effect until June 30.

Despite the possible impact on the consumer, Pedro Faria points out that these are changes that were already on the horizon. “It is important to emphasize that all of this is already priced and is not new. It is already included in the inflation expectations that we see the Central Bank disclosing. It is already included in the collection estimates. Everyone is taking into account the effects of these changes And the inflation expectations that the Central Bank releases based on consultations with financial market agents show a drop. Even though they are agents who have a slightly more conservative reading of inflation, they have fallen in the last four weeks. They came from 6.05% and went to 5.71 in the last Focus Bulletin”.

Pedro Faria also observes that the new ICMS may not have a long life, in view of the discussions surrounding the tax reform. According to him, what is on the agenda is a greater simplification in taxation. The fixed rate for gasoline is already part of this perspective, but the rules that are being considered should include fuels. “The change in gasoline was already foreseen, but we expect it to be swallowed up by this broader change in the tax reform, which has this spirit of tax simplification and the generation of productivity gains”.

Petrobras Policy

The new ICMS for gasoline takes effect just two weeks after Petrobras announced its new pricing policy, putting an end to the International Parity Price (PPI) that had been in force for more than six years, during the governments of former presidents Michel Temer and Jair Bolsonaro. In the old model, the trends of the international market were followed.

Now, the alternatives that the consumer has in the domestic market and the conditions obtained by the state-owned company for production, import and export are considered. Changing the PPI was a promise made by President Luiz Inácio Lula da Silva during the election campaign last year.

On the same day that the change was made public, Petrobras made official a reduction in the prices practiced for the sale of gasoline, diesel and cooking gas to distributors. In the case of gasoline, the drop was R$ 0.40 per liter. The impact for the consumer was smaller. The average price of a liter of gasoline at gas stations fell, on average, by R$ 0.20, according to a survey by the ANP released on Friday (26).

For Pedro Faria, the new policy gives Petrobras flexibility to fulfill its mission as a public and state-owned company. The economist observes that the state-owned company needs to act in defense of the country’s energy sovereignty, guaranteeing the availability of fuels at stable and affordable prices for the Brazilian economy.

“It can hold any increases or even lower the price to be able to accommodate this change in taxation and then it releases and corrects the variation. Petrobras’ function, considering its public nature, is precisely to smooth out variations so that we have a stable price .Do not go up and down according to the dollar, the price of oil or changes in taxation”. wanted by Brazil AgencyPetrobras did not say whether it intends to make any adjustments to gasoline prices to soften the effects of the new ICMS.