Petrobras Greenlights Tax Payment That Helps Lula’s Budget

(Bloomberg) — Brazilian oil giant Petrobras agreed to pay 19.8 billion reais ($3.49 billion) in back taxes to the federal government at a time when President Luiz Inacio Lula da Silva is seeking increased revenue to help balance the budget.

The settlement, approved by the state-controlled driller’s board on Monday, is the first major decision under new Chief Executive Officer Magda Chambriard. The payout was disclosed in a public filing.

The funds will boost Finance Minister Fernando Haddad’s efforts to eliminate Brazil’s primary fiscal deficit, which excludes interest payments, this year. Clearing outstanding tax debts is key to his revenue-raising strategy.

Haddad has been under mounting pressure in recent weeks as markets pulled back over concern he would be unable to reach the fiscal target. The government is now facing increasing calls to cut public spending to keep deficits under control.

Government demands that Petroleo Brasileiro SA pay outstanding taxes intensified last year. For the company, the settlement removes a legal overhang and is expected to reduce fines and interest owed.

The amount approved affects taxes relating to the chartering of vessels or offshore oil rigs. Petrobras will pay around 8 billion reais by using pre-existing judicial deposits and fiscal credits. The oil company will deposit another 3.75 billion reais on June 30 with the remaining amount divided in six installments.

Petrobras could add to its contribution to the government fiscal plan, as the oil giant’s board may review the possibility of paying the rest of the extraordinary dividend from 2023 over the course of the year. As the company’s controlling shareholder, the government would get the biggest chunk of the payout.