Lula Pushes for ICMS Cuts on Fuel & Blames Global Factors for Price Hikes

Brazilian state governors have rejected a request from President Luiz Inácio Lula da Silva to reduce the ICMS, a state-level tax on goods and services, including fuels, according to statements released Tuesday. The rejection comes as the federal government seeks to contain rising diesel prices amid international market pressures.

The National Committee of Finance Secretaries (Comsefaz) issued a statement asserting that cutting ICMS taxes does not guarantee lower prices for consumers and could result in significant revenue losses for states, impacting essential public services like health, education, and public safety. Comsefaz argued that previous tax reductions have not consistently translated into lower prices at the pump, citing instances where gasoline prices fell 16% at refineries in the last three years while increasing 27% at gas stations.

“The result is that the population ends up bearing a double loss,” Comsefaz stated. “On the one hand, it does not effectively receive the expected reduction in the final price of fuel. On the other, it bears the effects of the suppression of public revenues essential to the financing of policies and services indispensable to society.”

President Lula’s appeal to the governors followed the announcement of a package of federal measures aimed at stabilizing diesel prices, including the temporary zeroing of federal taxes on fuel and subsidies for producers and importers. The government is also pursuing strategies to boost domestic refining capacity and increase fuel supply.

The states’ resistance echoes concerns raised during the previous administration of Jair Bolsonaro, when forced ICMS cuts were implemented. Governors argue that these prior reductions significantly harmed state finances without delivering the intended benefits to consumers.

The current situation is further complicated by rising oil prices on the international market, exacerbated by geopolitical tensions, including conflict in the Middle East. Lula has publicly attributed rising diesel costs, in part, to actions taken during the Trump administration, suggesting that these actions have benefited Russia.

As of Wednesday, March 19, 2026, no further negotiations between the federal government and state governors have been publicly scheduled. Comsefaz has not indicated a willingness to reconsider its position.