São Paulo – Brazilian President Luiz Inácio Lula da Silva signed a presidential decree on Thursday (12) setting the PIS and Cofins federal taxes levied on the import and sale of diesel to zero. He also signed a provisional measure granting a diesel subsidy for producers and importers.
“[The measures are] to ensure that this war does not reach the pockets of drivers, the pockets of truckers and, above all, if it doesn’t reach truckers’ pockets it won’t reach the plate of beans, the lettuce and onion salad, and the food people eat the most,” Lula said during a press conference at the Planalto Palace in Brasília.
The measures were announced as temporary—until December 31 of this year—and were justified by the rise in oil prices caused by the war in Iran, which has been forcing countries to release emergency reserves.
The tax cut should reduce the price per liter by BRL 0.32 [USD 0.06] at the refinery. The subsidy to producers and importers is expected to have an additional impact of BRL 0.32 [USD 0.06] per liter.
Together, the two measures should lower the diesel price by BRL 0.64 [USD 0.12] per liter, according to calculations by the Finance Ministry. The subsidy to producers and importers will be conditional on proof that the benefit was passed on to final consumers.
Export tax rate
To offset the loss in revenue and encourage oil refining in Brazil, the government will begin charging a 12% tax on oil exports. A second decree was also published, this one on a permanent basis, establishing oversight and transparency measures to curb abusive fuel price increases for speculative purposes.
With the PIS and Cofins taxes on diesel set to zero, the government expects to lose BRL 20 billion [USD 4 billion] in revenue. The diesel subsidy, in turn, is expected to cost the federal budget BRL 10 billion [USD 2 billion].
The government expects this amount to be offset by the export tax on oil, which is projected to yield BRL 30 billion [USD 6 billion] in revenue by the end of the year.
The 12% export tax on oil barrels, in addition to offsetting the revenue loss caused by the diesel subsidy, is expected to encourage exporters to keep part of their production in the domestic market rather than exporting more in response to rising global prices.
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Translated by Guilherme Miranda
