States might want to elevate ICMS to compensate for losses;  perceive influence on inflation

States might want to elevate ICMS to compensate for losses; perceive influence on inflation

In June, President Jair Bolsonaro sanctioned a bill that establishes a ceiling for the Tax on Circulation of Goods and Services (ICMS) about fuels🇧🇷 electricity and telecommunications🇧🇷

However, this generated a loss of revenue for state governments that impacted the provision of public services. in case the States want to compensate for this loss, it will be necessary to reverse this limitation of the ICMS🇧🇷

At least that is what a survey carried out by the National Committee of Finance Secretaries of the States and the Federal District indicates (get it done🇧🇷 According to calculations, the impact on collections was R$ 124 billion.

To recompose the budget, state governments would have to raise the standard average tax rate ICMS by four percentage points from 2023, from 17.5% to 21.5%.

According to Comsefaz, the increase in the tax rate ICMS could provide R$ 33.5 billion to public coffers.

Of the 20 States surveyed, 18 registered a drop in the collection of blue chips (fuels🇧🇷 electricity and Communication) from BRL 17 billion to BRL 10 billion.

Regarding the total ICMS collected by the surveyed states, electricity started to correspond to 7% of the collection and communication to 2%.

already the Gasoline corresponds to 6% of the collection and ethanol to 0.7%. O dieselin turn, started to account for 5.6% of collection and other fuels for 3.4%.

See how much each State would have to raise the ICMS rate to compensate for the loss of collection

state current ICMS optimal ICMS recovered value
Acre 17% 20% BRL 203 million
Ceará 18% 21.4% BRL 2.16 billion
Federal District 18% 22.5% BRL 1.15 billion
Holy Spirit 17% 21.1% BRL 1.64 billion
Goias 17% 24.2% BRL 5.32 billion
Mato Grosso do Sul 17% 20.7% BRL 1.20 billion
Mato Grosso 17% 20.2% BRL 1.10 billion
For 17% 21.5% BRL 1.99 billion
Paraíba 18% 23.6% BRL 1.05 billion
Pernambuco 18% 20.5% BRL 2.43 billion
Piauí 18% 24.1% BRL 779 million
Paraná 18% 23.5% BRL 4.92 billion
large northern river 18% 22.3% BRL 867 million
roraima 17% 19.6% BRL 76 million
Rio Grande do Sul 17% 20.9% BRL 4.25 billion
Santa Catarina 17% 20.7% BRL 3.44 billion
sergipe 18% 22.7% BRL 450 million
Tocantins 18% 22.8% BRL 499 million
Brazil 17.5% 21.5% BRL 33.5 billion

Impact of ICMS on inflation

The limitation of ICMS was promoted by federal government as a way to control fuel prices, which were high and putting pressure on inflation🇧🇷

This resulted in three consecutive months of deflation in the Broad Consumer Price Index (IPCA🇧🇷 The indicator presented negative results in July (-0.68%), August (-0.36%) and September (-0.29%).

In October, the measure lost strength, resulting in an increase of 0.59%. If the rate rises again, inflation should also gain momentum.

OBcentral anchor is keeping an eye on inflationary movements and the projection is that there will be a readjustment of 0.25 percentage points in the Selic in February or March of next year, depending on the effects of the Transition PEC🇧🇷

Source: Money Times

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