Estonian Finance Minister Jürgen Ligi does not support reducing the excise tax rate on diesel to help drivers at a time when oil prices have risen sharply, writes ERR News.
Compared to February, retail diesel prices in Estonia have increased by more than 70 cents per liter, and consequently the VAT rate per liter of fuel has also increased by 16-17 cents. Last week, the Estonian Transport Fuel Association proposed temporarily lowering the tax rate to the European Union minimum level, which would be 330 euros per 1,000 liters of diesel fuel instead of the current 428 euros. The excise tax rate has already been reduced in Latvia and Poland.
Krista-Maria Alas, executive director of the Estonian Transport Fuel Association, said the government should lower the excise tax to prevent Estonian companies from being in an unequal situation compared to neighboring countries. She noted that lowering the excise tax rate would equalize fuel prices for consumers, while at the same time the state would not have to worry about the budget deficit. That is why it is being proposed to reduce the excise tax, while maintaining the VAT amount, which would allow it to cover the difference. After submitting the recommendation to the government and the Ministry of Finance, the association has received conflicting signals.
The government, in response to the association’s proposal, indicated that it would submit it to the Ministry of Finance. In turn, the Ministry of Finance responded that lowering the excise tax is a political issue that should be taken up by the government. Alas noted that
this makes it very difficult to understand who is actually responsible for making the decision.
Finance Minister Ligi, meanwhile, continues to insist that lowering the excise tax rate is a stupid idea, which is why he has not proposed it to the government. The minister said that it would be like carrying water in a sieve, and he would not propose such nonsense that would do harm instead of help. “The international need right now is to restrain ourselves, not to stimulate consumption, but to release reserves onto the market — and the government has already done that. The recommendation of scientists and international organizations is precisely to conserve fuel,” said Ligi.
He admitted that this does not help transportation service providers, but stressed that in conditions that force countries to release their fuel reserves to the market, consumption should not be encouraged. The minister said that reducing the excise tax rate would have a negligible effect, because the buyer would not really see it.
In turn, Luminor Chief Economist Lenno Uusküla pointed out that it is currently very important to keep energy prices at a certain level. If the conflict in the Middle East continues, then changes in the amount of taxes should definitely be considered. Uusküla noted that diesel fuel was cheaper in Estonia than in Latvia and Lithuania, and at times when Lithuania raised excise tax rates, fuel prices at its filling stations also increased significantly. The economist said that now that Latvia and Lithuania are reducing excise tax rates, and Estonia is not, the advantages will be lost.
It was planned that Estonia would raise the excise tax rate in May, but the plan has now been postponed.
Read also: Estonia does not plan to reduce excise duty on fuel
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