States might want to elevate ICMS to compensate for losses; perceive influence on inflation
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- December 8, 2022
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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
