Union will compensate states by R$ 26.9 billion for fuel ICMS

After simply over two months of negotiations, the Union and the Federation models unanimously closed an settlement to compensate for losses in assortment of the Tax on the Circulation of Items and Providers (ICMS) with the exemption of fuels. The federal authorities will compensate the states and the Federal District by BRL 26.9 billion till 2026.

The settlement was introduced by the Minister of Finance, Fernando Haddad; by the secretary of the Nationwide Treasury, Rogério Ceron, and by the governor of Piauí, Rafael Fonteles, who represents the 27 governors within the negotiations. In accordance with Ceron, of the R$26.9 billion, round R$4 billion will likely be paid by the Union this yr, and the rest will likely be paid in installments by 2025 or 2026, relying on the case.

“It was very unfair what occurred final yr. That is a part of the R$300 billion in issues that the earlier authorities bequeathed us. This (at this time’s settlement) represents solely 10% of the issues we’re managing”, stated Haddad, referring to the tax legal responsibility with the exemptions that preceded final yr’s elections.

In accordance with Haddad and Fonteles, the settlement will likely be taken to President Luiz Inácio Lula da Silva and to the presidents of the Senate, Rodrigo Pacheco, and of the Chamber of Deputies, Arthur Lira. The minister and the governor of Piauí may even take the phrases of the doc to the ministers of the Federal Supreme Courtroom (STF) Gilmar Mendes, André Mendonça and Luiz Fux, rapporteurs of the actions involving the 2 legal guidelines that exempted the ICMS from fuels final yr.

Phases

Of the overall return of BRL 26.9 billion, round BRL 9 billion have already been compensated to the states by means of injunctions granted by the STF, which suspended the cost of installments of state money owed to the Union. In these instances, there will likely be a reckoning to confirm the stability that every Federation unit nonetheless has to obtain.

In accordance with Haddad, a minimum of two states, São Paulo and Piauí, did not pay debt installments greater than they’re entitled to obtain. In these instances, particular remedy will likely be given for the return of overcompensated sources.

In different states, which have funds to obtain, the remaining stability will likely be deducted from the debt installments with the Union or paid with contributions from the Union (to states with small money owed or no money owed with the federal authorities) till 2026

Primarily based on the remaining stability, the cash will likely be paid in installments as follows. States with as much as R$150 million in compensation will obtain 50% in 2023 and 50% in 2024, with sources from the Nationwide Treasury. States with compensation between R$150 million and R$500 million will obtain one third of the quantity in 2023 and two thirds in 2024. States with greater than R$500 million will obtain 25% in 2023, 50% in 2024 and 25 % in 2025.

The states within the Tax Restoration Regime – Rio de Janeiro, Goiás and Rio Grande do Sul – will obtain the identical method because the others, with the distinction that they’ll be capable to write off R$ 900 million within the portion of the money owed with the Union in 2026. in fiscal restoration, these states are settling their money owed with the federal authorities below particular situations, whereas finishing up native fiscal adjustment packages.

Historic

In June of final yr, the complementary legal guidelines 192 e 194 imposed a ceiling of 17% or 18% (relying on the state) for ICMS on gasoline, power, telecommunications and public transport. Beforehand, it had acknowledged that it charged greater than 30% of ICMS on fuels.

Throughout the processing of the legal guidelines, the parliamentarians inserted an article obliging the Union to compensate the losses of assortment of the ICMS, tribute collected by the states. The earlier authorities vetoed the system, however Congress overrode the veto, forcing the federal authorities to pay some compensation beginning this yr.

On the finish of final yr, the STF gave 120 days for the Union and the Federation models to succeed in an understanding. The primary issue was to estimate the income loss. Throughout the negotiation, the account various between R$ 18 billion and R$ 45 billion. In early February, the National Treasury had announced the intention to pay the compensation in instalments.

“The governors’ account was higher supported, however it reached a quantity that was fairly troublesome for us to take care of. The restore was between 18 billion (billion reais) and 45 billion (billion reais). When it is a deal, it is by no means passable to anybody. It’s an account that makes based mostly on parameters. Technically, the work was intense and reached a worth of R$ 26.9 billion”, defined Haddad.

The governor of Piauí, who till final yr was president of the Nationwide Committee of Finance Secretaries of the States and the Federal District (Consefaz), praised the negotiations. In accordance with him, the settlement serves as an expertise for discussions on tax reform.

“This dialogue happened in a really calm, receptive method on either side. I feel this may contribute to the brand new stage, which is the dialogue of tax reform. Indisputably, the states are very on this situation, not least as a result of essentially the most advanced tax is the ICMS, which actually must be reformed, and the nation to be introduced into line with the worldwide expertise”, stated Fonteles.