Government reduces gasoline tax with an eye on ethanol production and consumer prices

The government has taken steps in a juggling act involving gasoline content and prices to avoid an increase in final prices for the consumer. The amount of ethanol (“álcool anidro”) that is added to gasoline will be reduced from 25% to 20% on October 1 (the sugarcane harvest will be less than expected).. Normally that would increase the price of gasoline (which is more expensive than ethanol), but the government will reduce one of its fuel taxes, the “Cide,” from R$230 to R$192.60 per cubic meter of fuel.

The secretary of Economic Oversight at the Ministry of Finance, Antônio Henrique Silveira, says the measure is exclusively due to a small increase in price that could occur with the change in the mixture of gasoline and sugarcane-based ethanol. He adds that the measure is no guarantee that prices will remain stable. “Prices are free,” he declared.

In practical terms, the government has reduced the Cide from R$0.23 to R$0.19 per liter. That will translate into a loss of some R$50 million in tax revenue for the government.