Ratas: Excise duty needs to be reevaluated due to inflation

Fuel prices at at Neste gas station in July, 2021.
Fuel prices at at Neste gas station in July, 2021. Source: Siim Lõvi/ERR

The planned excise duty rise on diesel fuel, electricity and gas in spring 2022 should be reevaluated due to inflation, Chairman of the Center Party Jüri Ratas said on Thursday. Budget discussions start this week.

Last month, the consumer price index rose by 5 percent compared to August 2020 and by 0.7 percent compared to July. The biggest impact was a 15.7 percent increase in the price of petrol and a 22.7 percent rise in the price of diesel fuel.

Writing on social media on Tuesday, Ratas said a 5 percent increase in a situation where wages have not increased will lead to a decrease in purchasing power.

"The so-called temporary rise in inflation can also lead to higher inflation expectations and wage agreements. Private sector wages are now growing faster than public sector wages, pensions and state subsidies. If we do nothing, the gap will widen further," Ratas wrote.

"I take the above as a signal that it is worth re-evaluating the previous decision regarding excise duty rates on fuel, electricity and gas," he added.

Ratas also said public sector workers' salaries need to rise again. "One possibility for this is the upcoming negotiations on next year's state budget," he noted.

On Thursday, the Ministry of Finance will present a new summer economic forecast, which will provide an overview of public finances for this year and the coming years. Based on this, the government will start to prepare a new budget.

Last year, the former Center/Isamaa/EKRE government agreed to temporarily reduce excise duties on diesel fuel, gas and electricity until the end of April 2022.

This spring, after the new Reform/Center government took office, Minister of Finance Keit Pentus-Rosimannus (Reform) decided to increase the rate again, saying it was only a temporary crisis measure.

Fuel retailers and transport companies expect the government to keep the excise duty on diesel at the same level.

Inflation of close to 5 percent is likely to remain for several months, and may even be exceeded some months, according to SEB bank.


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Editor: Helen Wright

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