Latvia's commissioner dismisses 'homemade' fuel tax proposals

  • 2005-05-11
  • Staff and wire reports
RIGA - During a visit to the homeland this week, Andris Piebalgs, the European commissioner for energy policy, said he did not support the idea of reducing or abolishing taxes on oil products as a means of combating high prices at the pump.

Speaking to the European affairs committee of Latvia's Parliament on May 9, the commissioner said, "I am of the opinion that the tax on oil products is necessary, and it is not a solution for, say, reducing the fuel price."

Piebalgs reminded MPs that there are no grounds whatsoever to hope that world oil prices would move downward in the near future. The state should seek other ways for reducing the fuel price, he said.

"There are no indications that the oil price will move back. At this point there is no actual alternative either," he said.

Piebalgs, an experienced politician from the liberal Latvia's Way party, was nominated as Latvia's commissioner last November after the previous candidate, Ingrida Udre, was rejected by Commission President Jose Manuel Barroso.

In recent weeks top politicians have called for an all-out battle against high oil prices. Some have suggested that the leading retail operators were fixing prices.

But Piebalgs said that the rise in oil prices is related to growing demand in Europe and China, and it is expected to last for years. He also said that, amid fast growing oil prices, it is vital to think of the use and efficiency of renewable energy resources.

Latvija Statoil, the largest fuel retail trader, has suggested cutting the VAT on oil products from 18 percent to 15 percent, though Transport Minister Ainars Slesers has reacted coolly to the proposal.

The government has ordered the Economy Ministry to seek ways for reducing administrative costs that could help reduce retail prices, while Minister Krisjanis Karins said that curbing administration-related expenses is about the only thing the government can do to stem price growth.

Piebalgs voiced an opinion that about a fifth of the oil products price is speculation, and that ultimately the price could fall by this amount. "There is also price speculation, such as after accession to the European Union," he said. "At this point it is only possible to talk about reducing the price by the level that is related to bureaucratic processes," he said, confirming Karins' words.