Source: Estadão - São Paulo / SP, 18/05/2011

BRASÍLIA - The executive secretary of the Ministry of Finance, Nelson Barbosa, said today that the government would like the ICMS tax rate on interstate operations to be between 2% and 4% and that the transition period should not exceed eight years. "The rate and the term are negotiation criteria, but we think that a rate above 4% would bring a small benefit in relation to what we have today," he said.

In a meeting this afternoon with the Minister of Finance, Guido Mantega, the governors of the South and Southeast regions asked for higher rates, between 6% and 7%, and a transition period of up to 12 years. According to Barbosa, the transition period will depend on the conclusion of the analysis of the size of the measure's impact on the states' accounts.

Barbosa said that the Ministry of Finance is committed to evaluating the possibility of renegotiating the debt contracts between the States and the Union. “This is an important issue, because the index and the rate may be above what is on the market. There was an opening by the Ministry of Finance to perhaps include this proposal in the transition ”, he declared.

Governors think that the correction of contracts (today of IGP-DI plus 6% per year or IGP-DI plus 7,5% per year, depending on the contract) is very high and want to include the renegotiation of the debt in the discussion of reducing ICMS rate. Another proposal presented by the governors was to bring to the discussion of the tax reform the change in the distribution criteria of the State Participation Fund (FPE).

The Supreme Federal Court (STF) determined that a new regulation should be approved to take effect as of January 1, 2013. Barbosa stated that the Ministry of Finance understands that this is an “eminently state” discussion, but that if there is an agreement between the States, the federal government is not opposed.

The executive secretary of the Ministry of Finance said that if the proposal to compensate states that lose resources due to the drop in ICMS collection requires that a complementary law be sent to Congress, a resolution that resolves the problem of the division of FPE.