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CIDE-Combustíveis

CIDE-Combustíveis (CIDE tax on fuels)

The Contribuição e Intervenção no Domínio Econômico-Combustíveis”  applies to the  import and marketing of gasoline, diesel, jet kerosene and other oils fuels (fuel oil), liquefied petroleum gas (LPG), including that derived from natural gas and naphtha, fuel and ethyl alcohol. It must be paid by those who import or commercialize the fuels covered by the tax.

EXEMPTIONS

Naphtha, for the production of petrochemicals, however if it is assumed for the production of gasoline naptha is not exempted.

Under the new decree published on the 27th of September 2011, the CIDE tax on fueles will fall to R$192.60 per cubic meter from R$230.

Government policy

The Brazilian government is influencing  and controlling the prices at the pump in order to influence the inflation. This specific tax has a significant impact on the price at the pump. Despite huge oil reserves Brazil is still a net importer of oil. Petrobras, the state-owned oil company has faced significant losses as they were not allowed to pass on the higher cost of imported oil to the final consumer. The cut in this tax as per September 2011 will improve the downstream results of Petrobras. Brazil is facing a massive increase in demand for oil and it is derivates. A growing middle-class is using their money to buy cars. At the same time the production of ethanol is at a record low, forcing the government to cut the blend on gasoline fuel from 25% to 20%, further increasing the demand of crude oil.

The Brazilian government has temporarily cut these taxes in the past as well to cope with raising crude oil price on the world market. Cide taxes has been reducerd in 2008 and 2010, following a policy implemented over the last 8 years. The current weakness of the Real has forced the government again to cut the tax.