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Soaring Price of Oil Raises Distribution of Royalties 30% in Brazil

05/08/2018 - 11h35

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NICOLA PAMPLONA
FROM RIO

The sharp rise in international oil prices may be of concern to gasoline final consumers, but it has helped states and municipalities going through financial difficulties. Tax revenues from petroleum royalties increased by 23.4% in the first four months of the year, reaching R$ 6.4 billion (US$ 1.8 billion).

Considering the payment of special tax levies - a type of Income Tax charged on major production fields - governmental beneficiaries from oil tax revenue collected R$ 11.8 billion (US$ 3.32 billion) in the first four months, 30% more than during the same period in 2017.

The royalties are calculated monthly based on a formula that considers the production of each field, the price of oil and the exchange rate. The total amount is then divided between the Federal Government, States and Municipalities where producers are located.

Adriano Vizoni/Folhapress
Ilhabela, in São Paulo
Ilhabela, in São Paulo

Among the greatest beneficiaries from the elevation in prices is the State of Rio de Janeiro - which has been suffering during the last few years from a grave financial crisis partly brought on by a previous drop in oil prices - as well as municipalities with major production, like Macaé, Maricá and Niterói, in Rio de Janeiro, and Ilhabela, in São Paulo.

Foto: Ricardo Borges/Folhapress
Marica City
Marica City

In Rio, the financial resources are being used to cover part of the deficit of Rioprevidência, the pension fund for state public servants, and to free up other revenue sources to pay overdue salaries, which were paid on time in April for the first time after two years of late payments.

Translated by LLOYD HARDER

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