BRAZIL: Government reduces PIS/Cofins taxation on ethanol

Published: 07/31/2017, 2:26:30 PM

Brazil's federal government reduced the PIS/Cofins taxation on ethanol sold by distributors on Friday by BRL0.08 per litre (US$0.03), from BRL0.1964 (US$0.06) to BRL0.1109 (US$0.03) per litre, according to Brazilian public news agency Agência Brasil.

A fuel tax increase announced by the Brazilian government last week prompted negative reaction from the sugarcane industry, saying ethanol would lose competitiveness against gasoline at fuel stations.

In addition to that, Brazil's IRS confirmed that last week's increase was higher than the limit allowed by law. According to the IRS, the PIS/Cofins taxation on ethanol can't be higher than 9.25% of the average price paid by consumers in the last 12 months.

By reducing the taxation on ethanol, the Brazilian government will collect BRL501.7 million (US$161.4 million) less than initially expected in revenue, according to sources heard by newspaper Folha de S. Paulo.

Brazil's minister of Finance Henrique Meirelles had already said last week that the government was reconsidering the tax increase for ethanol, after complaints by the sugarcane industry, which also said the raise wasn't considering environmental benefits of ethanol consumption against gasoline.