Estonian Oil Association: Raising excise duty on fuel would be unwise

TALLINN – The Estonian Oil Association, the industry body for the fuel sector, on Thursday forwarded its vision for the future of fuel and transport policy to the parties holding coalition negotiations, describing a potential plan to raise the excise duties on fuel as a stupid decision strategically, economically and in terms of climate and social policy.

"We see it as a high risk that politicians have their fingers itching to plug the hole in the budget with the help of an increase in excise duties. However, data on fuel consumption in recent years show that no budget addition would come of it -- rather, the state budget would be losing out. The definite loser would be the economic situation of Estonia, however," Mart Raamat, the chairman of the association, said in a press release.

The Estonian Oil Association points out that in the event of an excise hike, trade in fuel across the border would increase again and the Estonian  transportation sector would lose out on competitiveness significantly.

"The excise duty reduction enabled road hauliers to increase their export revenue by 200 million euros per year. The domestic market was won back from foreign hauliers, and the competitiveness of international haulage was also increased," Raamat said, referring to a decision not to raise duties at the previously agreed rate as a measure of response to the COVID crisis.

The head of the industry body also argued out that talk about excise duty hikes as a climate policy measure is nothing but an act of misleading the public.

"In 2016-2019, when we had a higher excise rate than our neighbors, the mileage done on the roads increased for both passenger cars and trucks. It's just that Estonian trucks were replaced by vehicles with foreign number plates. There was no reduction in the climate footprint -- just the revenue was directed out of Estonia with the stupid increase in excise duties," said Raamat.

He also pointed out that high fuel taxes have a proportionally more painful effect on the wallets of poorer families with children.