Fuel prices shoot up after the end of tax breaks

In the ten days after the federal government ended tax breaks on fuels, a liter of gasoline became almost 10 percent more expensive at the pump, according to the latest data from the National Oil Agency. Prices rose faster than anticipated by Abicom, a local association of fuel importers. 

The current price levels mean that a standard 50-liter gasoline tank costs 21 percent of Brazil’s monthly minimum wage.

When announcing the return of social security taxes on gasoline and ethanol, the government opted for higher levies on gasoline than on less polluting ethanol. As a result, the rise in ethanol prices was much lower – 4.5 percent. 

Former President Jair Bolsonaro scrapped these taxes a few months before the 2022 presidential election in an attempt to boost his chances of winning another term by increasing voters’ purchasing power. 

To compensate for lower fuel tax rates, the government decided to tax crude oil exports at 9.2 percent for the next four months. Big oil companies sued the administration, but business courts in Rio de Janeiro have so far dismissed multiple lawsuits.

The hike in fuel prices is expected to impact overall inflation — which remains stubbornly high and widespread. 

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