Petrobras is paying less in taxes: shareholders come first.

Published on the website Spotlight

Petrobras in its Fiscal Report 2021 It reported that: “in 2021 it collected a total of R$ 202,9 billion in taxes and government participations which, added to the R$ 73,7 billion in dividends and interest on equity paid to the Union and other shareholders, confirm our commitment to transparency and demonstrate our contribution to Brazilian society. We emphasize that in the last six years Petrobras paid over R$ 1 trillion in taxes and government royalties." (emphasis added).

This statement at the beginning of the report, in the "Management Message" section, is at the very least ambiguous. Let me explain: Did Petrobras pay or collect more than R$ 1 trillion in taxes in the last six years? This makes a huge difference in terms of the tax burden disbursed by Petrobras to the State (federal, state, and municipal governments). What is the difference between the taxes collected or paid by the Company? 

Taxes levied on the sale of products and goods, such as CIDE, PIS, COFINS, and ICMS, are collected by Petrobras and then passed on to the Federal and State governments, but are ultimately paid by the consumer, since they are included in the final sale price of the products.

This is made explicit in the 2021 Fiscal Report itself, as shown in the graphs below, where the ICMS, CIDE, PIS and COFINS taxes are paid by the consumer in the sales price at gas stations.      

Components of the price of gasoline                     

 

Components of the Diesel Price

Pig ironPetrobras' 2021 Fiscal Report

 

The main taxes, in terms of volume, paid by Petrobras are Corporate Income Tax (IRPJ), Social Contribution on Net Profit (CSLL), and Government Participations (royalties, special participation, and area retention). In 2021, according to the Fiscal Report, Petrobras paid R$ 54,7 billion in government participations and R$ 10,4 billion in IRPJ/CSLL. 

Are the tax amounts paid by the Company too high or too low in relation to Petrobras' capacity to generate wealth (added value)? Furthermore, how has the proportion of taxes paid by Petrobras in relation to its added value evolved in recent years?

Wealth generation and tax payments

To answer these questions, data from Petrobras' DVA (Demonstration of Added Value) was used, discounting the taxes levied on sales (CIDE, PIS, COFINS and ICMS) paid by the consumer.

Sales taxes appear in Petrobras' accounting records as sales charges that "mainly include CIDE, PIS, COFINS and ICMS". (Financial Statements, 2021)(p. 25). Excluding these sales taxes from the VA and the total tax payment, we obtained the following results:

1. Between 2010 and 2021, the accumulated real value added was R$ 2.145 billion, with positive and negative real annual variations in the company's wealth generation occurring throughout this period (Graph 1). These fluctuations were mainly influenced by the sales prices of derivatives in the domestic market, which represents more than 60% of the company's total revenue, and by the international price of oil. In addition to prices, the increase in VA is also explained by the significant reduction in extraction costs (lifting cost) with the high productivity of the pre-salt wells.

 

Chart 1 – Petrobras: Added Value (VA); taxes paid by Petrobras and proportion of tax payments in relation to VA (R$ billions deflated by the IPCA of 12/31/2021; %)

Source: Financial statements (Statement of Added Value) of Petrobras (various years). Prepared in-house.

 

* In 2020, Petrobras paid less tax due to the recovery of PIS and Cofins taxes totaling R$ 16,8 billion that were improperly transferred between October 2001 and August 2020.

2. The high real growth of VA (Value Added) between 2020 and 2021, of 149% (from R$ 116 billion in 2020 to R$ 288 billion in 2021 (Graph 1)), resulting from economic recovery and, above all, the increase in prices of derivatives, diesel, gasoline, cooking gas, etc., is noteworthy, at a much higher rate than the inputs acquired from third parties. This increase in the prices of derivatives is a consequence of Petrobras' derivatives pricing policy, which uses Import Price Parity (PPI) as a premise.

3. Between 2010 and 2021, taxes paid in real terms totaled R$ 620 billion, with disbursements decreasing year by year, especially since 2016. As a result, the proportion of taxes paid by Petrobras in relation to added value fell from 34% in 2010 to 26% in 2016, remaining at that level since then. Even in 2021, the company paid 25%, approximately R$ 72 billion (Graph 1).     

The data on screen clearly shows that Petrobras failed to pay more than R$ 1 trillion in taxes and government royalties over the past six years. The actual amount paid during that period was R$ 256 billion.

In fact, Petrobras collected these taxes amounting to R$ 1 trillion, a large part of which was paid by the consumer in the final price of refined products. In general terms, it is evident that Petrobras has been paying less tax to the State, proportionally to its capacity to generate wealth (VA), since 2016. 

If Petrobras is paying less taxes to the State, who benefited from the wealth generated by the company (R$ 288 billion in 2021 – Graph 1 and Table 1)?

It wasn't for the employees, since they received about 11% of the wealth generated (Table 1), the lowest proportion since 2010, when the company distributed to employees (in the form of salaries, benefits and FGTS) about 17,7% of the VA.

Table 1 below makes it clear that shareholders grabbed the largest share of the wealth generated by Petrobras (37,2% of the R$ 288 billion in 2021).   

 

Table 1 – Value added distributed in 2021

Source: Petrobras' 2021 financial statements. Prepared in-house.

 

It is worth highlighting that of this enormous volume of shareholder profits (R$ 106 billion in 2021), Petrobras distributed (in the form of dividends and interest on equity) approximately R$ 101 billion to its shareholders, retaining only R$ 7 billion of the total profit.

Of this distributed profit amount, which is approximately R$ 28 billion greater than the taxes paid, R$ 41 billion went to foreign shareholders; R$ 37 billion went to the federal government; and R$ 22,9 billion went to domestic private shareholders.  

In general terms, Petrobras's huge profits in 2021, celebrated by the market, the company's current management, and especially by shareholders, are based on the increase in the prices of refined products, the reduction in oil extraction costs, and the proportional decrease in taxes paid by the company in relation to its capacity to generate wealth.

While shareholders are grateful, the population suffers from rising prices of refined products, and the state receives proportionally less tax revenue from Petrobras.