Does oil incentive enrich or impoverish Brazil?

Before the new round of auction of pre-salt areas, the climate in the government was commemorative. The National Agency for Petroleum, Natural Gas and Biofuels (ANP) highlighted the record number of registered companies, totaling 16, among the largest in the oil and gas sector in the world.

This foreign interest is seen as a direct effect of a new law that changed the tax rules paid by oil companies. For Mr Júlio Lopes, draftsman of the provisional measure that became known as the MP of the trillion and became Law No. 13.586/2017, it was a breakthrough. "Brazil has built a new system of attractiveness for external entrepreneurship in the area of oil," he said.

The law stipulates that, until 2040, all money invested in oil production may be deducted from the Social contribution on net income (CSLL) and the tax of legal persons (IRPJ).

For the technical and legislative consultant of the House of Deputies, Paulo César Ribeiro Lima, the law is a mockery. "It will generate a loss of revenue from the order of 1 trillion reais, without updating the present value," he said.

In partnership with the non-governmental organization, Lima signs a study that calculated how this drop in the collection will impact the different regions of Brazil up to 2040. "For states and municipalities, the loss can be 338 billion reais. For union, of 662 billion reais, "Lima foresees.

By these calculations, to attract foreign oil companies, the country gives up a public resource that is equivalent to 10 times the value destined in 2018 for the strengthening of the single system of health, for example, of 99 billion reais.

The account made by Lima is based on the interpretation of the first paragraph of this new law. According to the text, companies will be able to deduct in full, for the purposes of obtaining net profit, the "applied importance" in the activities of exploration and production of oil and natural gas deposits. "The use of this term, ' applied importance ', has left everything too generic," he says.

"Now, both royalties and signature bonuses, and other points, may be deducted from the IRPJ and CSLL-paid tax base for oil companies," he explains.

The amount raised with these two tributes is crucial for the country: part of the IRPJ (46%) is transferred to states and municipalities, as ordered by article 159 of the Federal Constitution.

"The most serious is that every time you make a deduction of that tax, the poorest municipalities lose. Less money is passed on to them, "says Lima.

In the case of the Northeast region, the production of the pre-salt under the sharing system could mean a loss of revenue of 141.4 billion reais due to the decline of IRPJ's repasses. "We see, in this example, that the pre-salt becomes an agent of impoverishment of the Northeast," laments Lima.

Until then, the legislation in force was clearer. Companies could not enter in the cost list the amount paid in royalties and subscription bonuses-an amount paid by those who win the bid in the signing of the contract. It was a way for the government to secure the tax collection. Source: CartaCapital.

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