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Brazil to cut ethanol tax by 8.55 centavos per liter

Brazil to cut ethanol tax by 8.55 centavos per liter

BRASILIA: The Brazilian government decided on Friday to reduce a federal tax on ethanol known as PIS/Cofins by 8.55 centavos per liter, according to a source with direct knowledge of the matter.

The government increased PIS/Cofins on July 20 for gasoline, diesel and ethanol in a measure to increase revenues and try to cut a large fiscal deficit.

But the decision on Friday, which should be officially announced as soon as Monday, refers only to ethanol, the source said. The increases announced last week for gasoline and diesel will be maintained, which will slightly increase the price advantage of the biofuel at the pump compared to gasoline.

Brazil’s Finance Ministry declined to comment.

The government decided to change the federal tax on ethanol after producers complained that the initial hike last week was illegal, saying the final levy should not exceed 9.25 percent of the average retail price.

After the decision on Friday, the federal tax on ethanol will stay at 24 centavos. The taxation on gasoline stays at 79 centavos per liter, and diesel stays at 46 centavos.

The reduction of the tax on ethanol will cut expected revenues from fuel sales federal taxation by 500 million reais ($159.64 million), the source said.