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Electric energy and ICMS

Rafael Herzberg's picture
Consultant energy affairs, Self employed

Rafael Herzberg- is an independent energy consultant, self-employed (since 2018) based in São Paulo, Brazil* Focus on C level, VPs and upper managers associated to energy related info, analysis...

  • Member since 2003
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  • Mar 14, 2023

Electric energy and ICMS

The decision of the Brazilian Supreme Court to maintain the collection of ICMS (VAT type) on the total energy bill puts an end to a discussion that lasted many years.

It is very questionable - objectively speaking. ICMS is a tax, as its name says in Portuguese, on the circulation of goods and services.

What "circulates" is the "commodity". The kWh energy. The infrastructure required for the energy to circulate should not be included in the calculation of the tax as it is a "fixed" infrastructure.

In other words - conceptually - energy costs in kWh should be charged. Those associated with infrastructure (called "wire fees" in the industry jargon) do not, of course!

But behind this decision one can very well identify the efforts of the states to maximize tax collection in order to fatten their budget revenues.

With this decision, we keep Brazil at the bottom of the market when the $/kWh ranking is the BRICS (Brazil, China, Russia, India, and South Africa) countries, for example. But who cares?


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