This week, for the first time in 85 days, Brazil’s oil major Petrobras announced a hike in diesel prices. The 9-percent increase is set to cause a headache for the federal government amid a widespread inflationary spiral. As such, with general elections a little over a year away, the central administration is seeking to make sure the blame for rising fuel prices is diverted elsewhere.
The strategy, therefore, has been to pass the buck for increasing fuel prices on the State Goods and Services Tax (ICMS), levied and collected by state governments. ICMS corresponds to 27.6 percent of the price of gasoline in Brazil, and 15.9 percent of diesel prices.
On Tuesday, during an event alongside President Jair Bolsonaro, House Speaker Arthur Lira announced that Congress would discuss a proposal to cap ICMS tax charged on fuel, in an attempt to halt rising prices at the pump.
Fixed tax on fuel sales
The proposal is to transform ICMS on fuel into an ad rem tax — that is,...
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