Bill to slash excise duty on gasoline heading into second reading

95- and 98-octane gasoline and diesel prices at a Tallinn filling station on Tuesday, June 7 2022.
95- and 98-octane gasoline and diesel prices at a Tallinn filling station on Tuesday, June 7 2022. Source: Siim Lõvi/ERR

The Riigikogu Finance Committee has sent for its second reading draft legislation that aims to lower the excise duty on gasoline to the lowest level permitted in the European Union. This should translate into a 25-cent price drop at the pumps.

The current excise duty rate for unleaded gasoline is €563 per 1,000 liters. The bill would lower it to the minimum permitted level of €359.

Executive manager of the Estonian Oil Association Mart Raamat said that lowering the excise duty by the maximum amount would lower the price of gasoline by €24.48 as the duty is also subject to VAT.

The original aim of the bill, introduced by the then opposition Isamaa party, was to lower the rate for a period of one year, while Isamaa later withdrew their initial proposals and the current bill has no time limit.

"This would not be a temporary but a permanent measure. No one can say today how long this economic situation will last. We know already that fuel, especially diesel, is in short supply. Notable price advance is forecast for September. Estonia needs to do something to help its people and enterprise," committee chair Aivar Kokk (Isamaa) suggested.

Kokk said that representatives of the Social Democrats and the Reform Party did not support the proposal. "The others did. But this should not be interpreted as the outline of the next coalition as the parties' positions on this matter have always fluctuated. It was only recently that they supported the fiscally marked fuel excise duty reduction in the Riigikogu. We do not know how the land lies on the floor," Kokk suggested.

The MP said that it is difficult to forecast how the Riigikogu could vote in the current situation (following Reform's dismissal of Center ministers from the cabinet – ed.) even though the way votes were cast in the committee suggests the bill could pass. "We proposed sending it for its second reading on Monday," Kokk added.

He said that the bill's effect on the budget is approximately €45 million, while recovering fuel sales could compensate.

"We can see gasoline sales down 10 percent this year, 5 percent for diesel. Lowering prices could see consumption bounce back," Kokk suggested.

The Isamaa MP said that other European countries have already taken various measures to bring down the price of fuel. Finland and Latvia have relaxed the biocomponent requirement for a price reduction of 12 cents per liter. "Germany lowered excise duties, while Poland did it some time ago," he said.

"Estonia has one of the highest fuel taxes in the EU today," Kokk pointed out.

"But it definitely depends on the market situation. We do not know what the price of gasoline and diesel will do going forward. Fuel sellers warn that the price per liter could hit €3 by September as Europe is looking at a shortage. When it comes to gasoline, [a reduction of] 20 cents per liter is a lot," Kokk said.


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Editor: Marcus Turovski

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