University of São Paulo Tax Reform Project Raises Concerns Over Environmental Implications

Minister Fernando Haddad recently presented the first part of a Tax Reform regulation project and, among several items, environmental issues were presented, with important proposals for the energy transition and the incentive for more efficient vehicles that use renewable sources of energy. energy, in addition to the creation of a “sin tax”.

Although the government expects the project to be approved by the middle of the year, Pedro Luiz Côrtes, professor at the School of Communications and Arts (ECA) and the Institute of Energy and Environment (IEE) at the University of São Paulo, believes that a more viable deadline would be the end of the year — as parliamentarians also indicate —, requiring a very concentrated effort for this to actually be successful.

Project proposals

The expert explains that one of the proposals would be the creation of a “sin tax”, which would be a selective tax that will tax more vehicles, boats and aircraft, as well as mineral goods and other products that use fossil fuels. “There is an exemption from this sin tax for public transport services, electricity and telecommunications operations and also goods produced for export”, he comments.

According to the professor, this selective tax is related to a perspective that the government has presented of using tax instruments and tax incentives to develop environmental solutions, with reductions in the consumption of fossil fuels and prioritizing more sustainable vehicles. “The tax aims to burden those activities that cause environmental damage, because this damage will end up generating additional costs for the government itself”, he states.

He also complements this vision by informing that the harm caused by pollution caused by the burning of fossil fuels — climate issues or even cardiovascular and respiratory diseases — will be felt in the Unified Health System (SUS). Therefore, he understands that the idea of ​​the tax is to penalize, in some way, activities or products and consumer goods that have a negative environmental impact.

Côrtes explains that the project’s exemptions are consistent with the federal government’s Mover program — which is not mandatory, but grants incentives to companies that contribute to reducing environmental impact. “The exemptions go in this direction, for example, cars or light commercial vehicles that have low carbon dioxide emissions would be exempt from this tax, and considering a proposal from Mover to be implemented in 2027, which is from the well-to-wheel cycle, that is , take the cost in terms of carbon dioxide emissions, from the production of the fuel to its final use”, he adds. Furthermore, it also exemplifies other exemptions, aimed at vehicle recyclability, the reuse of production stages in the country, the use of natural gas as an input in industrial processes, the acquisition of vehicles by professional drivers and people with special needs, and the use of renewable fuels for vehicles.

Interesting, but incomplete

Despite very interesting items and good proposals, the professor states that the project has some deficiencies. “It does not inform what the Ecological ICMS will look like, which is an instrument that rewards municipalities for sustainable and environmental preservation practices”, he warns.

Côrtes also talks about the lack of an energy transition plan in Brazil, even with the country adopting several sustainable solutions, such as biofuels — ethanol and biodiesel — or wind and solar plants. “So we have all this, despite not having an energy transition plan, which would be very important to signal investment. But it is through bills, incentive programs or this regulation that the government signals the path that we should follow, in order to reduce our greenhouse gas emission footprint”, he concludes.