Government to discuss fuel excise duty hike

TALLINN - The Estonian government is set to discuss on Thursday how to mitigate the impact of surging fuel prices, which have risen sharply due to the crisis in the Middle East. Among the proposals under consideration is the cancellation of previously planned excise duty hikes, reports the Postimees newspaper.

Prime Minister Kristen Michal of the Reform Party said on the Vikerraadio program "Stuudios on peaminister" ("The Prime Minister is in the Studio") on Tuesday that he has requested the cancellation of the excise duty increases be considered, both with the relevant ministers and with Kristina Kallas, the chair of coalition partner Eesti 200 and the Minister of Education and Research.

"This is to prevent rising prices on the world market from further contributing to our own price increases, and to slow them down," Michal explained. "All these proposals will be brought before the government, because the government's process is to first base its work on data, request calculations and assessments, and only then make decisions."

The opposition parties in the Riigikogu, Isamaa and the Center Party, are calling for the cancellation of the fuel excise duty increase scheduled to take effect on May 1, citing the global fuel crisis.

According to Isamaa's proposed bill, this would mean cancelling a five percent increase in the excise duty on gasoline, a seven percent increase on diesel fuel, an 18 percent increase on natural gas, and a 46 percent increase on electricity.

"The war in the Middle East will continue for an unknown duration, bringing with it extraordinary instability in the fuel market. The Riigikogu must do its utmost to prevent a worsening price shock and to reduce the impact of the fuel crisis on inflation in Estonia, ensuring that people's livelihoods and businesses' competitiveness are not dealt an additional blow. The quickest way to achieve this is to cancel the excise duty hikes on energy carriers and electricity planned for this year, which are set to take effect on May 1," said Aivar Kokk, deputy chairman of the Isamaa party.

The Center Party is proposing to temporarily lower the value-added tax (VAT) on motor fuels to 13 percent and to cancel the excise duty increase.

According to Center Party chairman Mihhail Kõlvart, the sharp deterioration in the international security situation has caused extensive disruptions in energy and commodity markets. "Events in Iran have increased uncertainty regarding energy supplies and driven up the prices of oil and petroleum products on the world market. Such a price hike is quickly passed on to Estonian fuel prices, as we are heavily dependent on imports," he stated.

Kõlvart stated that the government must do everything in its power to halt the rising cost of fuel for the end consumer. "Temporarily reducing the VAT rate on motor fuels to 13 percent is a justified measure to alleviate the impact of the fuel price hike, caused by the extraordinary international situation, on the Estonian economy," he explained. "The price of fuel, as an essential resource, affects not only people's ability to cope financially but also industry, agriculture, and ultimately food prices through increased transportation costs. Cancelling the excise duty hike scheduled for May 1 would also help curb overall inflation. The planned increase, combined with a 24 percent VAT, would raise the price of fuel by nearly four cents per liter and would cost consumers nearly 48 million euros a year. This additional expenditure will be passed on to the final prices of goods and services, and in these extraordinary circumstances, the government has a duty to prevent it."

Kõlvart emphasized that many people, families, and businesses are already facing financial difficulties due to several years of tax increases and economic recession. This year, they have also been hit by exceptionally high electricity bills, leaving them with no buffer to cope with additional price hikes.