ICMS impacts prices and CNA demands solution for fertilizers

The Brazilian Agriculture and Livestock Confederation (CNA) presented a study on the impacts of ICMS Agreement No. 26/2021 on fertilizer prices throughout the country. The topic was discussed at a meeting of the Working Group (GT) that deals with the tax benefits of the Tax on Circulation of Goods and Services (ICMS) at the National Council for Tax Policy (Confaz).

The agreement revoked the maintenance of credits related to the tax, promoting changes in state taxation on these inputs since 2021, establishing gradual rates until 2025. According to a study prepared by E2+ Consultoria, at the request of the CNA, the estimated impact of the measure increased the cost of rural producers by R$ 11,74 billion since the beginning of the validity, explains Fábio Moraes, economist responsible for the study.

“The costs of this measure (adoption of Agreement 26/2021) varied considerably among the states due to the differentiation of the most representative crops from the state's point of view,” said Moraes. According to him, the study indicated that producers in Mato Grosso paid R$2,61 billion in the last four years. In Paraná, producers paid R$1,32 billion, while in Rio Grande do Sul the cost to the agricultural sector was R$1,23 billion in this period.

“And this has not been reflected in an increase in national fertilizer production,” added the economist. The coordinator of the CNA Economic Center, Renato Conchon, said that, in addition to production not having increased, the measure also has an impact on state tax authorities. This is because, starting in 2025, with the adoption of the 4% tax rate on fertilizers, ICMS credits related to freight for these products must be credited in full, and states are not allowed to determine a proportional refund of ICMS to contractors of road freight for fertilizers.

“There is a consensus among all market agents - producers, national industry, fertilizer mixers, state tax authorities and the government - that it is necessary to create an incentive for national fertilizer production,” he explained.

However, he highlighted, “what we are demonstrating today with the study is that the measure presented in 2021 had no effect in expanding national production, but increased the costs for rural producers and, additionally, is impacting the accounts of state governments”.

“States will need to ensure the maintenance of freight credits, for example. Producers and society are paying for a measure that is, in a way, inflationary,” concluded Conchon. The CNA defends the legal certainty provided for in ICMS Agreement No. 26/2021 itself, that, after the term of validity (31/12/2025), the provision be revoked by the states and the Federal District.

The study will also be presented to the State Federations of Agriculture and Livestock. In addition to representatives from CNA and E2+, representatives from the State Finance Departments and the Federal District that make up Confaz were present at the meeting.