Complementary Law 192/22, which changes the way ICMS (a Brazilian state tax) is levied on fuels, has been enacted. It also exempts diesel and cooking gas from federal taxes. Learn everything about the new ICMS and its impact on consumers' wallets here.

The new law was published on March 11, 2022, in the Official Gazette of the Union and came into effect on that date.

Therefore, from now on, the ICMS (Brazilian state sales tax) will have a single rate throughout the country. It will be collected all at once and no longer cumulatively, as it was before.

In this way, the government hopes to minimize the effects of the constant increases in fuel prices at the pumps.

Ultimately, there is widespread dissatisfaction among the population regarding the frequent price adjustments, which constantly raise fuel prices.

In March alone, Petrobras announced a price increase of 18% for gasoline and 25% for diesel.

Not to mention the direct influence of the rise in the dollar and the price of a barrel of oil in determining the final price.

Therefore, despite the tax reduction, it is estimated that the value of the new ICMS (Value Added Tax) will still not compensate for the recent adjustments made.

Okay, the acronym ICMS stands for Tax on the Circulation of Goods and the Provision of Interstate and Intermunicipal Transportation and Communication Services. Its value is defined by the states and the Federal District.

All revenue generated by the collection of ICMS (a Brazilian state tax) goes to the states, with no transfer to the Federal Government.

Thus, all products that circulate between cities or states, and also between legal entities and individuals (sale of products in a store, for example), will be subject to tax on their total value.

So, even if you don't realize it, you're paying ICMS (a Brazilian sales tax) on every purchase you make, since the tax is levied on the total value of the products sold.

Thus, as a general rule, all operations involving the circulation of goods or transportation and communication services are subject to ICMS (Tax on the Circulation of Goods and Services).

In the case of fuels, the price charged at the pump is the sum of the following costs: ICMS (a Brazilian state tax), the percentage related to Petrobras, federal taxes, and also the costs of distribution and marketing.

In some cases, there is an exemption from the tax. For example, interstate transportation of petroleum and the supply of electricity, sales or services abroad, and transactions involving newspapers and magazines, among others.

Well, with the new law, the tax will be collected in a single payment. Its collection will no longer be cumulative throughout the entire production and supply chain.

Also, the tax rate becomes fixed and valid for all states and the Federal District. Its collection is based on the refinery value.

In other words, there will be no fluctuation in the tax rate due to factors such as the rise in the dollar or the price of a barrel of oil on the international market.

Furthermore, the tax will now be collected based on the unit of measurement, such as liters or cylinders, and no longer as a percentage of the final price to the consumer. It will only vary depending on the type of fuel.

However, for diesel, the calculation will be different. The tax rate will be applied to the average of the last five years, not the current value.

The definition of this value will be the responsibility of Confaz (National Council of Tax Policy).

The law also stipulates that adjustments to the tax rate can only be made 12 months after the rate is set. Subsequent changes will only occur after a period of at least 6 months.

It is believed that unifying tax rates across states should improve tax enforcement. It should also lead to a reduction in tax evasion, which would increase revenue. As a consequence, there could be a reduction in costs for the end consumer.

A tax waiver of approximately R$ 18 billion is expected.

So, there is a lot of discussion surrounding the issue. Mainly regarding Petrobras' role in setting fuel prices.

Nowadays, people are questioning how, compared to its competitors, it achieves profitability around three times higher and generates billions in profits.

Petrobras, in turn, defends itself by arguing that the high investment made by producing companies to supply fuels justifies the high prices. This allows them to guarantee their profitability, as well as the quality and supply of fuels.

However, the fact that the company is profitable is not in question. But the Brazilian consumer should not suffer the consequences when filling up their car.

Because the price of a liter of gasoline in Rio de Janeiro is already over R$8.00. In some more remote locations in the country, the price has already reached R$12.00. 

Furthermore, according to experts, there should be a reduction in the price of gasoline of around R$ 0.61, and R$ 0.33 for diesel.

Therefore, the reduction may have come too late. In the end, it shouldn't significantly affect fuel prices at the pumps.

Finally, there is a whole discussion regarding Petrobras' role in reducing state revenue, the effectiveness of the measure as a tool to reduce inflation, and other details.

But ultimately, what matters to the consumer is the price they pay when they fill up their car.

Great, now you are better informed about the impact the new ICMS (Brazilian sales tax) will have on your wallet when you fill up your vehicle.

So, if you're planning to buy a car and are still deciding which model to choose, access the link below. Read our article where we present the 10 most fuel-efficient SUVs in Brazil!