Brazil Eyes Oil Windfall to Fund Fuel Tax Cuts

Brazil's government on Thursday unveiled a bill to be sent to Congress under which additional revenue from higher oil prices, driven by the U.S.-Israel conflict with Iran, would offset cuts to federal taxes on fuels.

Planning Minister Bruno Moretti said the proposal aims for full fiscal neutrality, with tax reductions contingent on the extra revenue generated by the rise in oil prices. Finance Minister Dario Durigan said the government is working on a "calibrated reduction" lasting two months.

The move comes as President Luiz Inacio Lula da Silva's government seeks to mitigate the impact of higher oil prices on consumers due to the conflict in the Middle East.

"People cannot be made to pay the price of this war," said Jose Guimaraes, minister of institutional relations.

Lula heads toward an October re-election bid, having seen his lead over main rival senator Flavio Bolsonaro evaporate, with polls now showing them tied.

The leftist leader's administration last month scrapped federal taxes on diesel, and announced subsidies for cooking gas. It also zeroed federal levies on biodiesel blended into diesel and on jet fuel.

According to Moretti, the bill's approval would allow the government to issue a decree to reduce federal taxes PIS, Cofins