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HomeEconomyTeam Lula's debate over Brazil's fuel tax policy intensifies

Team Lula's debate over Brazil's fuel tax policy intensifies

BRASILIA (Reuters) – A debate over a fuel tax has raged among top aides to Brazilian President Luiz Inacio Lula da Silva. Underscoring dissenting views within his circle about the future path of his nascent leftist government.

Former far-right Jair Bolsonaro unveiled plans for fuel tax cuts last year as he sought to ease inflation and win over voters ahead of an election he ultimately lost to Lula. Since Lula’s victory, his Workers’ Party (PT) has engaged in a bitter debate over what to do with the costly and popular measure.

Lula’s finance minister, Fernando Haddad, has long opposed the waiver, according to two Finance Ministry sources who spoke on condition of anonymity. Fernando Haddad has long opposed the exemption, arguing it would damage public coffers and undermine Lula’s green agenda. In public, Haddad said the final decision will be made by Lula.

“The decision (to extend the tax exemption until February only) was taken by the president and obviously he can reconsider,” he said in a meeting with Febraban, the lobby group representing the Brazilian bank, in January. said later.

Others in Lula’s circle have persuaded the president to extend exemptions for diesel and biodiesel until December of this year, and gasoline and ethanol until February.

Tensions are rising over whether to further extend gasoline and ethanol tax breaks.

In his fiscal plan presented in January, Haddad included the reimposition of gasoline and ethanol taxes from March. This would generate billion reais ($5.6 billion) in federal revenue and add financial support to Lula’s social spending programme.

But that stance was seen by some on the left in Lula’s camp as too pro-market, and the debate exploded in public on Friday.

In a series of Twitter posts, Congresswoman Gleisi Hoffmann, chairwoman of Lula’s Workers’ Party (PT), said that only when state oil giant Petrobras The fuel tax will not be restored until a new pricing policy is in place.

“This will likely start in April, when the board will be renewed with people committed to rebuilding the company and its role for the country,” she said.

Hoffman added that Petrobras needs a “fairer pricing policy,” which currently pegs domestic fuel prices to international oil prices, which makes oil prices weaker when commodities and the dollar appreciate. will be more expensive.

“We are not opposed to taxing fuel, but doing so now would penalize consumers, generate more inflation, and violate a campaign promise,” she wrote.

The finance ministry and the presidential palace did not immediately respond to requests for comment.

Vice President Geraldo Alckmin said Friday that the government has not yet made a decision on the fuel tax.

Central bank Governor Roberto Campos Neto, under pressure from Lula and his allies to lower interest rates, said the re-taxation of fuel would increase short-term inflationary pressures but would Improving Brazil’s fiscal situation, arguing that this will “be beneficial for the future”.



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