Fuel tax caps enter into force. Governors protest “tax chaos”

Fuel tax caps Governors
Governors say a nationwide single fuel tax rate will create a state of “tax chaos.” Photo: Joa Souza/Shutterstock

A cap on state-level fuel taxes approved by Congress last month enters into force today. This is one of the Bolsonaro administration’s latest electoral maneuvers. Since taking office in 2019, the president has blamed governors and state-level taxes for high fuel prices.

The new tax cap follows a decision by Supreme Court Justice André Mendonça, who ruled on June 17 that all states must charge the same rate.

Governors have asked the Supreme Court to strike down Justice Mendonça’s ruling, claiming the nationwide single tax rate will create a state of “tax chaos.” State revenues are expected to decrease dramatically, turning their fiscal situation from bad to worse.

The government is desperately trying to lower fuel prices at the pump in a push to claw back Mr. Bolsonaro’s standing in the presidential polls. However, as São Paulo Finance Secretary Felipe Salto told The Brazilian Report, the measure will not necessarily make a dent on fuel prices if Petrobras continues with its dollar-pegged pricing policy.