RIGA - Reducing excise and value added taxes on basic goods and fuel would be the most efficient way to mitigate the rising energy prices for residents, which is what the opposition has proposed multiple times, Saeima Social and Employment Matters Committee's member Gundars Daudze (Greens/Farmers) said in an interview with Latvian Radio.
Daudze was highly critical of the Welfare Ministry's proposal, explaining that provision of targeted support would be very difficult to implement and its administration would require enormous resources.
"That is why increasing benefits in line with inflation is a better solution," said Daudze, adding that this could apply to households and residents whose income did not exceed a certain threshold.
Asked whether support measures for residents currently being planned will be enough to cope with the rising energy prices, Daudze said it would definitely not, agreeing nevertheless that it would be "more than nothing".
Daudze emphasized that lowering excise tax and VAT on such products as food, medication and fuel would be a more effective support measure in the current circumstances. Budget revenue would not decrease in absolute terms, he claimed.
In particular, Daudze stressed the need to reduce taxes on fuel, like several European Union countries have already done, because the price of fuel is included in the cost of almost any other product or service.
As reported, according to the Welfare Ministry's draft proposals, in the next heating season, Latvian residents could be compensated for half of the increase in heat, electricity and natural gas tariffs, according to the draft information report developed by the Ministry of Welfare (MoW) and submitted for approval.
The MoW estimates that the price of natural gas for households in the next heating season could be around 140 euros per megawatt hour. Accordingly, if the monthly consumption of natural gas at the gasified facility is from 221 kilowatt hours (21 cubic meters) to 5269 kilowatt hours (500 cubic meters), the state will compensate 50 percent of the cost increase - 35 euros per megawatt hour.
On the other hand, if the monthly consumption of natural gas at the gasified facility exceeds 5269 kilowatt hours (500 cubic meters), the state will reimburse 75 percent of the aid granted to the first group, ie 75 percent of 35 euros per megawatt hour or 26 euros per megawatt hour.
The MoW forecasts that the average heat tariff for households in the next heating season could be in the range of 150 euros per megawatt hour. Consequently, the amount of compensation to cover the increase in heat costs could be set at 50 percent of the difference between the heat tariff for the next heating season and the median heat tariff set for the previous heating season, which is 68 euros per megawatt hour.
The MoW also urges that electricity price caps be set above which households would be partially reimbursed for electricity costs. Accordingly, they would be set at EUR 0.16 per kilowatt-hour, with a maximum compensation of EUR 0.10 per kilowatt-hour.
It is envisaged that the support instrument will be activated only if the price of electricity in a given month exceeds 0.16 euros per kilowatt hour. Accordingly, the first 100 kilowatt-hours would be reimbursed at 100 percent, the next 100-50 percent, and each subsequent 100-25 percent.
Thus, the maximum amount of compensation per household would not exceed 35 euros if the consumption is up to one megawatt hour.
The MoW also envisages the introduction of a new type of support - automatic reduction of the energy bill for low-income households, whose income per person does not exceed 743 euros and the income of other persons in the household is up to 520 euros.
In turn, to help vulnerable groups in society pay their utility and other bills in the next heating season, the MoW is offering to improve housing benefits so that a wider range of people can qualify. A one-off benefit for the disabled, seniors and other forms of support is also offered.
The total cost of the proposed support measures could be between EUR 450 to EUR 468 million, according to the draft report.