Brazil’s oil industry weighs fresh legal challenge to export tax

According to the sources, extending the tax through an administrative act gave it a regulatory character and weakened the government’s argument that it needed additional revenue to offset fuel subsidies. Data from the Ministry of Finance show the tax generated R$1.05 billion in revenue between March and May. June figures have not yet been released.

Last week, the government issued a decree under which the Foreign Trade Chamber (Camex), part of the Ministry of Development, Industry, and Trade (MDIC), extended the tax for another two months, just before the provisional presidential decree (MP) 1,340/2026 was due to expire. The measure had imposed a 12% levy on gross revenue from crude oil exports. Because Congress failed to convert the provisional decree into law, it lapsed. Without a new decision, the tax would have ceased to apply as of Friday (10).

When the government first issued the decree in March, several companies filed lawsuits challenging the tax and expected it to expire without congressional approval. Those cases remain pending. With the extension now in place, additional lawsuits are expected.

According to the sources, about a week before MP 1,340 was set to expire, there were indications the government intended to keep the export tax through a legal instrument viewed as weaker than a provisional presidential decree. “If this were the appropriate legal instrument [to maintain the tax], why didn’t they use it from the outset instead of issuing a provisional decree, which requires subsequent approval by Congress?” one source questioned.

Industry representatives also point to another factor supporting the view that the government’s main objective is to increase tax revenue from exports. Brazil’s refining capacity is operating close to its limit, while domestic fuel demand still requires imports. Because crude oil production far exceeds refining capacity, exporting the surplus is unavoidable, the sources said. In their view, this undermines the government’s claim that the measure is necessary to prevent domestic fuel shortages.

The legal fragility of the extension has also heightened concerns over regulatory instability. “The decision deepens concerns over the use of the Export Tax and raises important questions about legal certainty, regulatory predictability, and respect for due legislative process,” the Brazilian Association of Independent Oil and Gas Producers (Abpip) said in a statement.

Francisco “Chicão” Bulhões, founder and president of the Brazilian Institute for the Regulatory Environment and Freedom (Barla) and former Rio de Janeiro secretary for economic development, said taxing crude exports through administrative acts not only increases legal uncertainty but also makes corporate planning more difficult and the investment environment less predictable.

In his view, the tax will not reduce fuel prices at the pump and may have consequences beyond the government’s fiscal position. “When tax measures become instruments for raising short-term revenue, it hurts the competitiveness of the Brazilian economy,” Bulhões said.

Alexandre Chequer, global head of energy, oil and gas at Tauil & Chequer Advogados in association with Mayer Brown, said companies with projects already underway—or those evaluating assets to enter Brazil—have postponed investment plans because of the tax. He noted that the measure was adopted only months before a presidential election and argued that even if companies ultimately succeed in overturning the extension in court, the damage has already been done.