Fuel inflation causes boom to Brazilian states’ revenue

Fuel inflation boom states revenue
Photo: Alf Ribeiro/Shutterstock

While high fuel prices have hurt households’ purchasing power, they have bolstered the coffers of Brazil’s state government — with revenue from the ICMS goods and services tax jumping 40 percent in Q1 2022 compared to one year before. The share of fuel taxes in overall ICMS revenue rose from 23 to 28 percent throughout the 12-month span.

Average diesel prices at the pump rose 80 percent between January 2021 and March 2022, while gasoline prices soared 60 percent over the same period. Since last year, President Jair Bolsonaro has been warring with governors over ICMS taxation, claiming the levy is largely to blame for high fuel prices.

Governors froze the ICMS tax rate for gasoline and cooking gas in November and renewed the measure in March. It also approved a new model of charging for diesel, amid criticism that the change would reduce revenue — which was not the case.