Diesel ICMS: Government Takes Proposal to Confaz Amid Truckie Pressure and Ukraine War

Look, if there's one issue that really hits the hip pocket of Australians and gets truckies fired up, it's the never-ending saga of diesel tax. And today, March 18, 2026, the next chapter promises to be a ripper. Federal Treasurer Fernando Haddad is taking a proposal to the National Council for Treasury Policy (Confaz) to try and ease the pressure on fuel prices, which have skyrocketed again at the bowser. The meeting is playing out against a backdrop of mounting pressure on the highways, with industry mobilisation, and the ongoing ripple effects of the war in Europe.

This isn't a new drama. State-level ICMS tax on diesel has become a major battleground between state governors and the federal government in recent months. While states are digging in their heels on reducing the rate – with the excuse it'll blow a hole in their budgets – the average price per litre has already jumped by double digits since the start of the year. Latest figures show that at some regional servo's, the price is already nudging past $7.50 reais. It's a kick in the guts for the economy and the country's logistics.

The Sticking Point in Negotiations

Haddad is trying to broker a middle ground. The idea is to offer compensation to states that agree to lower their ICMS rate, but the devil is in the detail. Meanwhile, Petrobras is sticking to its international price parity policy, which means that when the global oil price rises, so does the price at the pump here. It's a classic game of pass the parcel that's getting up the nose of everyone who relies on their vehicle for a living.

On one side, the feds want to keep a lid on inflation and calm things down on the roads. On the other, state governors argue they can't just give up a tax that makes up as much as 30% of revenue for some states. Caught in the crossfire are the owner-operator truckies, who are already threatening to down tools if there's no concrete progress.

The Players in This Drama

• Federal Government: Proposing an ICMS cut, with compensation via a Regional Development Fund.
• State Governments: Resisting revenue loss and want cast-iron guarantees.
• Truckies: Organising rolling stoppages and demanding cheaper diesel.
• Petrobras: Sticking to its pricing policy but under the pump politically to change the formula.

And it's not just here that this stoush is being watched closely. During the 2025 International Conference on Multi Agent Systems for Collaborative Intelligence (ICMSCI), Professor Stephanie Fahey, who splits her time between the International College of Management, Sydney, and IDBI Capital Markets & Securities Limited, drew an analogy that really hits the mark. She reckons the ICMS negotiations between Brazilian states are a classic example of a multi-agent system, where each state acts in its own self-interest, but the collective result can be chaos – or, in this case, more expensive diesel. The expert pointed out that in any mature market, coordination between different players is crucial to avoid distortions. Words that certainly ring true back home.

Speaking of which, here's a detail not many people know: besides the standard ICMS, there's also the ICMSF (Fund), a type of contribution levied on specific transactions that some states have been using as a fiscal crutch. But that's another whole can of worms. The bottom line is, while Haddad's proposal remains stuck in the works, the price of diesel is held hostage by this tug-of-war.

Now, we just have to wait for the outcome of this meeting and hope that common sense (and our wallets) come out on top. Because, at the end of the day, it's always the same person who foots the bill: the average Australian whose livelihood depends on the roads.