The Federal Government recently set a spending ceiling for the ICMS (Tax on Circulation of Goods and Services), in its attempt to reduce the escalation in the prices of fuels. On July 11, it was announced that the measure would last for more than 2 months. At least 20 states in Brazil have already announced the reduction of the fuel tax.
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According to a survey carried out by the National Agency of Petroleum, Natural Gas and Biofuels (ANP), in recent weeks the price of gasoline has shown that it has been falling, dropping by 8,97%. Ethanol and diesel also had a reduction of 4.23% and 0.39%, respectively.
These reductions, so far, are lower than expected by the government and disclosed by the Ministry of Mines and Energy. At the end of last month, 11 states and the Federal District filed a lawsuit with the Federal Supreme Court (STF) against this ICMS reduction, with the justification that the measure represents a major intervention by the Union in States. It was also stated that the Federal Government was acting rashly in order to solve the problem of inflation.
In view of this, this measure extracts from the states the autonomy over the determination of rates. It is also worth mentioning that setting the ICMS spending ceiling also reflects on natural gas, electricity, communications and public transport.
Finally, states are also arguing that ICMS collections in 2021 represented about 86% of all state government collections. Therefore, the measure has an unprecedented impact on revenues, not only for states, but also for all municipalities.
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