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President Lula (PT) agreed with his team on a formula to reestablish the taxation on gasoline and ethanol, which maintains the Ministry of Finance’s position of raising R$ 28 billion by the end of the year. At the same time, the strategy also responds to requests from the political wing, which is against the full return of taxation so as not to generate more inflation and a high increase in the price of gasoline and ethanol. The reinstatement will not be complete as of March, but Fernando Haddad’s team’s (Finance Minister) forecast of raising R$ 28 billion will be maintained. The proposal, which is still being technically designed, will make changes to the structure of taxes in the fuel production chain. The formula to be disclosed will be based, according to government officials, on three principles: Environmental sustainability, taxing more fossil fuel; the social, penalizing the consumer less; and economic, guaranteeing an extra R$ 28 billion at the end of the year.
Price increase
Although the Finance Ministry has not detailed how the recharging of the two fuels will be, it was informed that, for environmental reasons, gasoline, will pay more tax than ethanol, which is a renewable energy source. According to calculations made by the Brazilian Association of Fuel Importers (Abicom), the price of gasoline in the gas station should rise about $ 0.25 per liter. Economists project inflation of 1% in the month if taxes return in March.
Petrobras
This impact, however, should be mitigated by a combination of a gradual resumption of tax collection and a reduction in prices charged by Petrobras at refineries. Without giving details, Minister Haddad said that Petrobras has a “cushion” that could be the state-owned company’s contribution to help contain the price of gasoline, amidst discussions on the re-encumbrance of fuels.
Other fuels
The government reported that vehicle natural gas (GVN) and civil aviation kerosene, fuels that were also expected to be reensed from 1 March, will remain discharged.
Import Price Parity (PPI)
Government discusses with Petrobras the end of price parity with abroad, this is the central point of a series of changes that the government intends to put into practice to contain the impact of increases in gasoline and ethanol at the pumps. The idea is to end the Import Price Parity (PPI), adopted since 2016, which considers the price of oil and the dollar in 100% of the calculation. The proposal under discussion, according to sources, foresees that 85% of the calculation will be based on domestic production costs and the remaining 15% will be linked to international quotations. This new proportion would mitigate the impact of dollar and oil fluctuations on the international market. The calculation may suffer small variations in the case of diesel and gasoline since the volume of imports is different. The debate on the new model has not yet reached the Board of Directors of the state-owned company, which should only take place after the general meeting of shareholders scheduled for 27 April.