Brazil approves law to reduce fuel taxes and mitigate energy crisis
The Brazilian Senate has given the green light to a major bill aimed at reducing federal taxes applied to the import, production, and commercialization of fuels. After obtaining overwhelming support with 61 votes in favor and only two against, the proposal is now headed to the office of President Luiz Inácio Lula da Silva for final approval.
The measure, which was also previously approved in the Chamber of Deputies with 318 favorable votes, seeks to counteract the fluctuations and the increase in international oil prices, aggravated by the instability derived from the conflict in the Middle East.
Details and scope of the measure
The tax benefit package covers a wide range of energy products, including gasoline, diesel, biodiesel, ethanol, and aviation kerosene. As explained by Senator Teresa Leitão, the bill’s rapporteur, the main objective is to protect the national economy against global energy market turbulence.
- Fiscal compensation: The reduction in tax collection will be balanced by the increase in public revenue from the hydrocarbon sector, which has shown significant growth this year.
- Promotion of biofuels: The law ensures that the competitiveness of ethanol remains protected. In the event that gasoline taxation decreases by 30% or more, the tax on ethanol will be reduced to zero.
- Subsidies: Up to 1.2 billion reais have been allocated to support ethanol producers and another 750 million in incentives for the compensation of tax debts.
The text seeks to mitigate the economic impacts caused by the crisis in the international energy market derived from the conflict in the Middle East.
Teresa Leitão, senator for the Workers’ Party.
Additional incentives and Women’s World Cup
In addition to the measures in the fuel sector, the new legislation contemplates a strategic boost for the national industry. The granting of up to 5 billion reais in tax credits between 2027 and 2031 has been enabled, intended to strengthen the production of fertilizers and bio-inputs in the country.
Finally, the project includes provisions of great social and sporting relevance, such as tax benefits for the extraction of strategic minerals, financing for high-complexity hospitals, and tax exemption for the organization of the 2027 Women’s World Cup, an event of which Brazil will be the host.
