The Brazilian federal authorities have introduced a bill proposal to Congress that would change how state fuel taxes are established, in an attempt to reduce fuel prices volatility. The reform would affect the tax rate of the ICMS (Imposto sobre Circulação de Mercadoria e Serviços), a VAT-equivalent tax that ranges between 12% and 30%, depending on the product and the state of consumption. Under the proposed bill, Brazilian states would have to submit proposed ICMS tax-rate to the National Finance Policy Council (CONFAZ) and any increase in the tax would become effective after 90 days, to make the market more predictable.
In 2019, taxes accounted, on average, for around 18% of gasoline prices in Brazil. Earlier in February 2021, Petrobras raised the average price of gasoline at refineries by 8% and the price of diesel by 6%. In addition, the state-owned company modified its pricing policy to track international parity over a 12-month period instead of every three months.