Reduction of the ICMS ceiling: learn everything about the subject
Understand the possible impacts of reducing the ICMS ceiling
Announcements
Reducing the ICMS ceiling can have an impact on both prices and state revenue.
Arthur Lira (PP-AL), president of the Chamber of Deputies, stated that he intends to put to a vote a complementary bill that limits the ICMS (Tax on the Circulation of Goods and Services) to 17%.
According to the proposal, the estimate is that the ceiling will be the modal ICMS, that is, a standard rate for goods and services.
To learn more about the subject, read on.
What is ICMS?
ICMS is the acronym for Tax on the Circulation of Goods and Provision of Interstate and Intermunicipal Transport and Communication Services.
The tax is regulated by Complementary Law 87/1996, also called Kandir Law. The values are defined by the Federal District and the states.
This tax applies to both sales within Brazil and imported goods.
Basically, it applies when a taxable product or service circulates between municipalities, states or from companies to individuals.
All income generated from ICMS revenue is forwarded to the states, that is, without generating a transfer to the Federal Government.
Which operations are subject to ICMS?
ICMS is an important source of revenue for the states.
In the case of legal entities, this tax is levied on the following transactions:
• Operations relating to the acquisition of goods in general
• Transport of goods, merchandise and valuables between Brazilian cities and states
• Provision of communication services
• Provision of services abroad
• Import of goods, regardless of purpose
• Entry of oil into national territory, with incidence on its derivatives, when not intended for commercialization or industrialization
What is exempt from ICMS?
There are some transactions that are exempt from ICMS. Among them, we can mention:
• Marketing and circulation of books, newspapers and periodicals
• Export of goods
• Interstate operations related to electricity and oil, when intended for industrialization or commercialization
• Transactions related to gold, when defined by law as a financial asset or exchange instrument
• Leasing operations
• Fruit and vegetable operations
• Agricultural input operations
• Acquisition of vehicles adapted for people with physical disabilities
How to pay ICMS?
To collect this tax, the company must register with the State Finance Department (Sefaz) in the region where it operates.
This way, it will receive a state registration (IE) to confirm that the business in question contributes to this type of tax.
As ICMS varies according to the state, information about the tax must take into account the place of operation.
What is the ICMS of each state?
As previously stated, ICMS is a state tax.
This means that in practice, each state has its own rates for each product.
In any case, there is a rate that serves as a general rule, since the tax amount applies to most goods.
| STATE | ICMS |
| Acre | 17% |
| Alagoas | 17% |
| Amazonas | 18% |
| Amapá | 18% |
| Bahia | 18% |
| Ceara | 18% |
| Federal District | 18% |
| Holy Spirit | 17% |
| Goias | 17% |
| Maranhao | 18% |
| Mato Grosso | 17% |
| Mato Grosso do Sul | 17% |
| Minas Gerais | 18% |
| To | 17% |
| Paraiba | 18% |
| Paraná | 18% |
| Pernambuco | 18% |
| Piauí | 17% |
| Rio Grande do Norte | 18% |
| Rio Grande do Sul | 17% |
| Rio de Janeiro | 18% |
| Rondônia | 17,5% |
| Roraima | 17% |
| Santa Catarina | 17% |
| São Paulo | 18% |
| Sergipe | 18% |
| Tocantins | 18% |
Source: Mobills
Chamber approves ceiling for ICMS on fuels and energy
On 05/25/2022, the Chamber of Deputies approved a bill that limits the ICMS charge to up to 17%.
The impacts of the reduction may be seen in prices and state revenue.
With ICMS at 17% for energy and fuels, the reduction in the country's inflation could reach up to 1%, assess André Braz, from FGV, and economists from the investment brokerage firm Nova Futura.
This calculation was performed based on the weights of each state in the IPCA, the main Brazilian inflation index, multiplied by the reduction in ICMS.
In April 2022, the index stood at 1.06% – the highest value for the period in more than 25 years.
The increase was mainly driven by food and transport. In relation to the latter, fuel prices increased significantly, with gasoline standing out.
However, state revenues point to another scenario regarding the reduction of the ICMS ceiling. According to XP calculations, the estimated loss is R$60 billion. According to researcher Sergio Gobetti, the loss would be around R$70 billion.
It is important to remember that in the short term, the ICMS ceiling at 17% will have a positive impact on reducing prices for the consumer, which is appropriate at the moment, since inflation is eroding purchasing power.
However, in the future, the reduction in revenue could generate problems for areas that depend on public accounts.
Yasbek explains that at the current time, the states are experiencing a scenario of high revenue, due to rising inflation, high oil prices and wage freezes in the states.
Source: CNN Brazil
Can reducing the ICMS ceiling reduce inflation in the long term?
The ICMS ceiling would be applied to sectors such as electricity, fuels, public transport and communications, for example.
But the reduction is not a certainty, since there are several important factors that cause impacts on the price of fuel, such as the rise of the dollar and the company's own pricing policy. Petrobras.
One of the main objectives of this project is to reduce the price of services that have been impacted by inflation for several months. Consequently, this is passed on to the end consumer.
In fact, the project could lower inflation and prices in the short term.
However, as mentioned, other factors must also be taken into account, as they are related to the increase in the price of certain goods and services.
Conclusion
The reduction of the ICMS ceiling should reduce prices in the short term, but without long-term guarantee.
If approved by the Senate, the reduction will have a different impact on each state.
