By Mateo Bueno Sá
Brazil's federal government has extended its 12% tax on crude oil exports through Dec. 31. The decision came Friday (Nov. 6) from the Gecex-Camex, the executive committee of the Foreign Trade Chamber, the body that deliberates on foreign trade policy under President Luiz Inácio Lula da Silva. The previous deadline was due to expire Saturday (Nov. 7), so the rate stays in force without interruption.
The levy applies to exports of crude petroleum oils and bituminous minerals. It takes effect immediately.
Third renewal of a 'temporary' Brazil oil export tax
This is the third extension since the tax was introduced in March. At the start, the government presented it as an exceptional measure. The stated aims were to encourage refining in Brazil, guarantee domestic supply and cushion the price increases caused by tensions in the Middle East involving the United States, Iran and Israel.
The exception is now six months old and keeps being renewed. Before this week's decision, the tax had been extended for another 60 days in September. Now the deadline runs to the end of the year.
How much the government has collected
The revenue helps explain why the tax has not gone away. According to the Federal Revenue Service, the oil export tax raised R$ 7.982 billion (Brazilian reais) through July. That money goes into the federal Treasury while the oil sector pays for the fallout of the external crisis.
In practice, anyone selling crude oil abroad pays 12% more, and companies planning investments have to build that cost into their calculations. The Gecex-Camex is keeping the charge on one of the most important products in the export portfolio of Brazil's oil sector.
What happens after Dec. 31?
The government has given no official information on what will happen after Dec. 31. It is unclear whether the tax will end, be extended again or take another form. For companies that buy, sell and sign long-term contracts, that uncertainty weighs as much as the rate itself, and it has put the market on alert.
The tax has also been challenged in court. A court in Brazil's Federal District suspended it through a preliminary injunction (liminar), according to the site's earlier coverage of the topic. The picture is one of legal dispute and successive extensions, with no clear end date.
Why it matters
Brazil is a major oil exporter, and export taxes directly affect the revenue of producers and the investment decisions behind them. A measure announced as an exception in March has now been renewed three times. It is bringing billions of reais to the federal government, while the private sector has no clear signal about what the rules will be next year. For foreign investors and traders following Brazil, the lack of a defined horizon is the central issue.
