The tax reform scheduled to begin in 2027 is expected to result in an average 18% increase in water rates for consumers. The increase stems from a higher tax burden on sanitation companies that provide water treatment and sewage services.
Currently, these companies pay PIS and Cofins at a combined rate of 9.25%. Because they are services of social interest, they are exempt from ICMS and ISS. With the new tax system, which will replace these taxes with the Tax on Goods and Services (IBS) and the Contribution on Goods and Services (CBS), the rate is expected to reach 26.5% by 2033, according to a study by GO Associados commissioned by Abcon Sindcon and Aesbe. The IBS Management Committee projects an even higher rate of 27.91%.
Impacts for consumers and the sector
According to a technical note from the sanitation industry’s representative bodies, not passing the tax increase on to rates would mean cuts of close to 26% in the sector’s infrastructure investments. This, in turn, would compromise the goals of universal basic sanitation, hurting millions of families who still lack adequate access to treated water and sewage collection and treatment.
To avoid higher bills or reduced investment, Abcon Sindcon and Aesbe argue that the sector should receive tax treatment similar to that of health services, which will have a 60% rate reduction. The argument is based on the direct relationship between the expansion of sanitation and improved public health.
Projections and economic analyses
A study by Instituto Trata Brasil shows that universal sanitation could save up to R$ 25 billion in public health spending by 2040. Currently, about 130,000 hospitalizations a year are caused by diseases related to water quality.
According to GO Associados, putting sanitation taxation on par with the health sector would raise the standard IBS/CBS rate by just 0.2 percentage point, preserving the universal access goals and the benefits of the reform.
Position of the National Water Agency
The National Water Agency (ANA) acknowledges that the reform is expected to affect rates, but stresses that the final impact is still undetermined because, in addition to the rate change, companies will start generating tax credits on inputs and expenses, which could balance out the effects for consumers.
Another point highlighted by ANA is that PIS and Cofins are currently embedded in the rate (calculated “on the inside”), while the CBS will be charged “on the outside” under the new model, which makes it difficult to determine the exact impact.
To guide this transition, ANA plans to publish a new reference standard for rate reviews by early December, after public consultations and analyses. Starting January 1, 2027, rates must be calculated with the CBS shown separately and without PIS/Cofins built in.
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