Jair Bolsonaro intends to increase government debt in order to lower gasoline and diesel prices. You want to zero the PIS/Cofins charge. As it should not offset this benefit with higher collection of other taxes, it would lose about R$ 52 billion per year in revenue.
If you take out a loan, you pay interest: about R$6 billion in the first year. It is part of the money that the rich, who have financial reserves, will take away with demagoguery. Just part. If prices fall, the wealthy and well-off will also benefit from reduced taxes on gasoline and diesel.
By the end of the year, Auxílio Brasil will have lost purchasing power due to inflation. Assume that the value of the aid is even R$ 430 per month, on average. In December, inflation will have eaten up enough value to buy a 5 kg bag of rice and a few more bucks. It is assumed here that the IPCA variation will be 5% in 2022; until June, it should run at an annual rate of 9%.
Speaking of poor people, it should be noted that cooking gas does not pay PIS/Cofins. Until November, consumption of this product, LPG, was lower than in 2020. But gasoline consumption increased by almost 10% (the average price increase was 49%). Who seems to be suffering the most?
With less tax, will gasoline and diesel become cheaper? It depends.
Prices vary wildly across the country. On average in December, a liter of diesel could cost between R$4 and R$7, rounded off, according to the National Petroleum Agency. Regular gasoline, between R$ 5.3 and R$ 8. It is difficult to predict how the tax discount would reach the stations in each region, not least because there are more factors influencing the resale price.
Depending on how the market is, the tax reduction may have a greater or lesser impact. This depends on concentration (or cartel, arrangements), the reaction of consumption to price changes or even expectations of inflation and the situation of the margins of those involved in the business. In short, part of the tax break can be appropriated by someone in the fuel chain.
What values are these? Tax in the amount of 69 cents per liter of gasoline, which in December cost an average of R$ 6.7 in the country. Of 33 cents per liter of diesel, which cost an average of R$ 5.40. In terms of gasoline prices, if everything went well and nothing else changed, the resale price reduction would therefore be 10%; in diesel, 6%.
Oil was 50% more expensive last year. This year, 12%. Will it increase more? When it comes to oil and the dollar, the guesses are varied and are usually very wrong. The bank Goldman Sachs predicts a barrel at US$ 100 in the third quarter and at US$ 96 on average for the year. Other analysts consulted in the market, however, estimate an average price close to US$ 80.
But supply is tight, due to the decision of OPEC and Russia, due to the inability of some producers to supply the agreed, risk of confusion in Ukraine and, structurally, low investment in production (also because of the green transition).
For large Brazilian banks, on average for the year, the dollar should be a bit cheaper than on average in December, but who knows. Even with average stability, the dollar may be salty until the election.
In short, a small change in the price of oil can throw the government’s tax cut into vinegar.
Subsidies can make sense, in certain cases, always thinking about the poorest first. But money will be given to the richest in order to subsidize the consumption of a polluting and decaying product. The government will further screw up the tax law. All this for electoral demagoguery, which may not even have a practical effect in the short term.
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