Brazil's government on Thursday unveiled a bill to be sent to Congress under which additional revenue from higher oil prices, driven by the U.S.-Israel conflict with Iran, would offset cuts to federal taxes on fuels.
Planning Minister Bruno Moretti said the proposal aims for full fiscal neutrality, with tax reductions contingent on the extra revenue generated by the rise in oil prices. Finance Minister Dario Durigan said the government is working on a "calibrated reduction" lasting two months.
The move comes as President Luiz Inacio Lula da Silva's government seeks to mitigate the impact of higher oil prices on consumers due to the conflict in the Middle East.
"People cannot be made to pay the price of this war," said Jose Guimaraes, minister of institutional relations.
Lula heads toward an October re-election bid, having seen his lead over main rival senator Flavio Bolsonaro evaporate, with polls now showing them tied.
The leftist leader's administration last month scrapped federal taxes on diesel, and announced subsidies for cooking gas. It also zeroed federal levies on biodiesel blended into diesel and on jet fuel.
According to Moretti, the bill's approval would allow the government to issue a decree to reduce federal taxes PIS, Cofins and CIDE where they apply to fuels. While PIS and Cofins are broad-based levies on company revenue, embedded across the economy, CIDE is a regulatory tax.
The calculation of additional revenue from higher oil prices would include oil sales by Brazilian state-run oil company PPSA, as well as royalties and dividends linked to the oil and gas sector, compared with the government's original revenue projections for the year in the budget law.
"If the bill is approved by Congress, we will implement a partial reduction in taxes on gasoline and ethanol," Finance Minister Durigan said.
According to government estimates, each 10-cent of a real reduction in federal taxes on gasoline over a two-month period would cost 800 million reais ($159.70 million) in forgone revenue.
The Finance Ministry said in a statement earlier on Thursday the government would announce a reduction in some taxes on gasoline, but during the press conference Durigan said that no such measure would be unveiled.
($1 = 5.0093 reais)
(Reuters - Reporting by Marcela Ayres and Fernando Cardoso, Editing by Natalia Siniawski and Stephen Coates)
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