Kallas on fuel excise duty reduction: Other EU states advise against it

Kaja Kallas.
Kaja Kallas. Source: Priit Mürk/ERR

Prime Minister Kaja Kallas (Reform) defended her party's objection to reducing excise taxes saying in other EU states, where excise rates on motor fuels have been considerably decreased, consumers have not seen cheaper fuel at the pump.

Prior to the formation of the new government coalition, Isamaa proposed a plan to lower the excise rates on motor fuels to the EU minimum. Kallas said this proposal is no longer on the table.

"While in opposition, people come up with all sorts of ideas; after joining a coalition, they assess whether these ideas are well-founded," Kallas said, speaking to the radio program "Uudis+" on Tuesday.

The experience of other European nations such as Germany and Poland shows a cut in excise tax does not reach gas station prices and does not result in savings for consumers.

"There was a great deal of outrage in the German media because excise taxes were not collected — even though they had been reduced, people had not noticed the difference," Kallas said.

Lowering excise taxes, Kallas explained, would have a direct impact on consumer price rates if fuel costs were stable, but in the present circumstances with prices fluctuating, the tax reduction would not reach the general public at all. She said that countries that have reduced excise taxes have cautioned against doing so.

Kallas said it is more reasonable to question gas station owners as to why, when prices on the global market fall, prices at gas stations do not fall as quickly as they rise when prices on the global market rise.

"Gas station profit margins could be looked at," she said.

Kallas explained even if the government lowers excise taxes, the intermediary keeps the interim profit, and gas station pricing remains the same. "Unfortunately, based on prior experiences, this is the case," she said.

Everyone, Kallas said, should see that the situation is not getting better.

"I'd even say that cheap fuel is no longer a viable option as the Ukraine war has changed our realities. Russian goods, particularly oil, are subject to sanctions. The entire global market has to be rejuggled. These circumstances are difficult and I cannot promise things will improve much," she added.

In the light of the circumstances, Kallas said, during the coalition talks it had been agreed to postpone the April 2023 excise taxes hike on motor fuels.


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Editor: Kristina Kersa

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