Federal government and states to discuss diesel tax solution

Supreme Court Justice André Mendonça. Photo: Carlos Moura/SCO/STF

Representatives from the federal government, states, the Supreme Court, and Congress set up a working group to seek an agreement on ICMS goods and services tax charged on diesel. They have been tasked with coming to a conclusion by June 14.

Supreme Court Justice André Mendonça sought to hold a conciliation meeting on Thursday, but ended up empty-handed. He is the rapporteur of a case discussing how states charge ICMS tax.

The federal government has been trying to reduce the price of gas at the pump by adjusting ICMS rules. But it faces opposition from governors, as a large share of their revenue comes from this tax, and they claim changes will have a negligible effect on fuel prices.

A March law states that there must be a single ICMS tax rate for diesel, which states set at BRL 1.006 (USD 0.20) per liter of S10 diesel. The government argues, however, that this is above what was previously charged, allowing states to circumvent the law.

The government argues that states should adopt a rate based on average revenue from the last five years, which would make the tax fall by BRL 0.27, according to Economy Ministry calculations.

If there is no understanding by the proposed date, Mr. Mendonça will decide on the issue himself.