Brazil Raises Fuel Tax to Meet Annual Primary Fiscal Target

By Lise Alves, Senior Contributing Reporter

SÃO PAULO, BRAZIL – Faced with dwindling revenues, Brazil’s federal government decided to raise fuel taxes. The government’s objective is to raise R$10.4 billion with the additional levy and meet the primary deficit fiscal target of R$139 billion this year.

“This [decision] was due to the decline in revenues and due to the recession and the bad results,” Brazil’s Finance Minister, Henrique Meirelles, told reporters justifying the increase in taxes. According to Meirelles the important thing is that ‘the most fundamental thing will be preserved: fiscal responsibility, fiscal balance’.

According to officials the increased tax rate for gasoline will increase from R$0.3816 to R$0.7925 per liter and for diesel fuel from R$0.2480 to R$0.4615 per liter at refineries. For ethanol, the tax rate will increase from R$0.12 to R$0.1309 for the producer, while for distributors, who did pay tax, the rate will be of R$0.1494 per liter.

The country’s production industry criticized the fuel tax hike, stating that the measure will delay the recovery of the economy and that the government should have sought other ways to balance public accounts and ensure compliance with the fiscal target for this year.

“Minister [Meirelles], raising taxes will not solve the crisis,” wrote the president of the São Paulo Industries Federation (FIESP), Paulo Skaf, in a note published on the entity’s website.

“On the contrary, it will aggravate it at a time when economic activity is already showing signs of recovery, with positive impacts on revenues in June. Tax increases fall on society, which is already suffocated, with 14 million unemployed, lack of credit and no general conditions of consumption,” concluded the FIESP official.