‎Brazil News

 

 

Event "Tax Reform and the oil and gas sector". 10/18/2023. Photo: Rômulo Serpa

On the eve of the delivery of the Tax Reform report to the Senate, the oil and gas sector discussed this Wednesday (18) how to preserve fiscal guarantees of the current tax system and, at the same time, improve the text approved in the Chamber of Deputies in the Proposal Amendment to the Constitution (PEC) 45/2019, which transforms the current taxation rules. According to the proposal, the long-awaited reform should boost Brazilian production and economic growth by simplifying and making tax payments more transparent.

 

An event, sponsored by the Brazilian Petroleum Institute (IBP), was held this Wednesday (18) at Casa JOTA, in Brasília, to debate the Tax Reform being voted on in Congress. Oil and gas market leaders presented their concerns for the sector's growth.

 

Watch the event in full:

 

 

 

 

Roberto Ardenghy, president of the Brazilian Petroleum Institute (IBP), highlighted at the event the investments of oil and gas companies in innovation, precisely one of the criteria adopted by the government to cushion the impact of taxes.

 

“Today, the United States is the largest producer (of oil), but with reserves that are already highly explored. Brazil is capable of being the country that will occupy this space and with oil with low carbon dioxide emissions. The pre-salt, for example, emits a third less greenhouse gases than the world average and with low sulfur oil”, commented Ardenghy, president of IBP.

 

The executive cites a study by the Organization of Petroleum Exporting Countries (OPEC) in which a scenario of growth in demand for oil until 2045 was estimated, a scenario fueled by uncertainties amid the advancement, for example, of electric cars.

 

  “The reform needs to maintain a regulatory environment favorable to the sector, which is already positive in geological and technological terms,” added Ardenghy.

 

The OPEC study estimates that demand for oil will grow 23% by 2045 and, therefore, will require US$14 trillion in global investments. The research highlights Brazil's potential to meet this greater demand.

 

 

Roberto Ardenghy, president of IBP. Photo: Romulo Serpo

During the debate, important points related to tax exemptions and incentives for the oil and gas sector were analyzed. Doubts were discussed regarding respect for currently existing tax benefits and the exceptions provided for in the new taxes created by the reform, such as the Contribution on Goods and Services (CBS), the Tax on Goods and Services (IBS) and the Selective Tax (IS), which will replace indirect taxes such as ICMS, IPI and PIS/Cofins.

 

“Disputes between national entities, between sectors and concerns about exceptions are normal. There is space to maintain what is working and I see that the flexibility in the current text already meets this. Ensuring the security of those who have already invested is also important for the government”, commented Gustavo Guimarães, executive secretary of the Ministry of Planning.

 

The president of GALP in Brazil, Daniel Elias, highlighted the importance of dialogue with the government and Congress around Tax Reform, which could be considered “a competitive advantage”. Although the executive supports the reform and considers the objective of attracting investments with simplified taxes important, he highlights that there are points to pay attention to in the PEC.

 

“We currently operate under the Repetro regime, which runs until 2040, and we understand that there is room for improvements and clarifications in the current version of the reform”, comments Elias.

 

Professor Eduardo Maneira, from the Federal University of Rio de Janeiro (UFRJ), praised the proposed Tax Reform model. For him, the text discussed in Congress brings Brazil closer to what is practiced in other countries. This is because the new system adopts premises such as non-cumulative and encouraging sectors with development banks. But the professor expresses concern about the Selective Tax (IS), considering the terms written in the project.

 

“IS could be a point of concern for the oil and gas sector. As it is written citing ‘activities harmful to people or the environment’, it was very open. It would be better to include it ‘under the terms of the complementary law’ that would define which sectors and under what conditions”, explained the expert.

 

IS is a tax proposed with the aim of reducing the consumption of products that are harmful to health, such as cigarettes and beverages.

 

Another point of attention, highlighted by the professor, is the importance of the exemption on capital goods also including services associated with them.