Brazil's government unveiled a bill on Thursday to be submitted to Congress, proposing to use additional fiscal revenue generated by rising oil prices—driven by conflict between the U.S., Israel, and Iran—to offset reductions in federal fuel taxes.
The Minister of Planning stated that the proposal aims to achieve full fiscal neutrality, with the extent and timing of tax cuts depending on the extra revenue generated by the oil price surge. The Finance Minister indicated that the government is considering a two-month "calibrated reduction" plan.
The move comes as President Lula seeks to cushion the impact of rising oil prices on consumers due to conflicts in the Middle East. The Minister of Institutional Relations emphasized, "Citizens should not bear the cost of this war."
Lula is facing a re-election campaign in October, with his lead having evaporated and polls showing him tied with his main opponent, Bolsonaro. Last month, Lula's administration already eliminated federal taxes on diesel, announced subsidies for cooking gas, and reduced federal taxes on biodiesel blended into diesel and on aviation fuel to zero.
According to the Planning Minister, if approved, the bill would allow the government to issue decrees lowering three federal taxes related to fuels: PIS, Cofins, and CIDE. PIS and Cofins are broad-based levies on corporate revenue, while CIDE is a regulatory tax.
The calculation of additional revenue from rising oil prices will include: oil sales revenue from Brazil's state-owned PPSA, as well as royalties and dividends related to the oil and gas sector, compared to the original revenue forecast in the government’s annual budget.
The Finance Minister said, "If the bill is approved by Congress, we will implement a partial tax reduction on gasoline and ethanol." According to government estimates, each R$0.10 reduction in federal gasoline taxes over two months would result in a revenue loss of R$800 million.
Earlier on Thursday, the Finance Ministry announced in a statement that it would reduce some gasoline taxes, but during a subsequent press conference, the Finance Minister clarified that such measures would not be implemented immediately.
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