Brazil Extends Gasoline and Ethanol Tax Exemption for 30 Days at Cost of $3.57 Billion

The Brazilian government has extended the federal tax exemption on gasoline and ethanol for another 30 days. The measure was formalized by a decree signed by acting President Geraldo Alckmin and will remain in effect until December 9. It was published in an extra edition of the Official Gazette on Monday night.

The economic team estimates the combined impact of the actions during this period at 3.57 billion reais. The government plans to offset this revenue loss with extraordinary income from oil appreciation, including royalties, sector taxes, and export tax proceeds extended through December 31.

“The measure seeks to prevent international cost increases from being fully passed on to consumers, reducing the risk of pump price increases and additional inflationary pressures.”

Under the renewal, federal taxes remain zeroed, preserving a tax relief equivalent to 0.89 reais per liter of gasoline and 0.19 reais per liter of ethanol. The additional subsidy for ethanol producers remains at 0.428 reais per liter.

The fiscal impact breaks down into 2.76 billion reais in tax exemptions for gasoline and ethanol between November 10 and December 9, plus an additional 813.41 million reais for the ethanol producer subsidy over the same 30-day period.

The exemption was originally created by decree on September 9 in response to oil price increases caused by the war in the Middle East. It was renewed previously 16 days before the second round of presidential elections, when the gasoline tax cut rose from 0.63 to 0.89 reais per liter and the ethanol subsidy increased from 0.25 to 0.43 reais per liter.

The government also maintains diesel benefits, including a subsidy of 2.12 reais per liter for domestically sold diesel renewed at the end of October, and an additional 1.40 reais per liter for imported diesel regulated on October 13. No decision has yet been made on continuing the imported diesel subsidy.