RIGA - Economy Minister Krisjanis Karins has suggested using provisions of EU law to reduce the excise tax on certain uses of diesel fuel as a way of combating the relentless rise of oil prices.
According to the ministry, the EU directives allow for applying tax breaks on diesel used commercially for agriculture, gardening, fisheries and forestry. The current excise tax for the above uses, except agriculture, is 164 lats (233.3 euros) per 1,000 liters of diesel.
The Economy Ministry believes Latvia should use the chance to apply the reduced excise tax rate for certain uses as it would promote competitiveness of local businesses. It stressed that Latvian businessmen are at a disadvantage compared with those in other EU member states, as they pay nearly 150 lats more in excise taxes per 1,000 liters of diesel fuel.
A reduced excise for commercial uses of diesel fuel would contain the overall price level growth and curb further growth of inflation.
As an example, the ministry estimated that a road construction company that consumes some 1.5 million liters of diesel fuel per year could cut its production costs by more than 16,700 lats per month if the above provisions of the EU law were introduced.
The Economy Ministry has been assigned the task of coping with Latvia's runaway inflation 's currently the highest in the EU 's and one of its previous proposals, to reduce VAT on foodstuffs, has run into opposition in the Cabinet.
The excise tax on lead-free gasoline is currently 192 lats per 1,000 liters, while the diesel excise amounts to 164 lats. Latvia is gradually raising its excise rates every year to reach the average EU level. It has been granted a transition period until 2013 to raise its excise taxes on various types of fuel.
