The Estonian government’s decision to increase excise duty rate of liquid fuels is already spelling trouble for the hard achieved coalition. The proposed hike has received criticism from experts and caused widespread outrage in the social media.
The new three-party coalition has decided to raise excise duty rate on petrol 10 percent each year from 2016–2019, and on diesel 14 percent in 2016, and 10 percent thereafter. This should triple the state income from motor fuel excise from 45.9 million euros in 2016 to 134.8 million in 2019. The excise duty rate for liquid fuels is currently at 422.77 euros per 1,000 liters.
However, it is unclear as to how much the rise will affect prices and the economy in general. In an interview to Estonian daily Eesti Päevaleht, Prime Minister Taavi Rõivas said that the duty rises should increase the price of fuel five cents per liter per year and if we take into account the already fluctuating oil prices, people might not even notice the effect. He also suggested that those who do, should consider purchasing a more economical car.
However, according to Alan Vaht, a board member of Estonian fuel station chain Olerex, to an average motorist who uses 70–100 liters of fuel a month, the decision will mean a 26 percent price hike and 260–370 euros of extra costs per year. Estonians, who in terms of purchasing power, are at the bottom six in the EU, will have to pay more fuel excise than the wealthiest nations in the union, Vaht wrote in Postimees. What families with children gain through increased child support, will hardly compensate for the general rise in living expenses that the excise duty rise will inevitably bring, he added.
Marko Saag from the Tallinn University of Technology told ERR that the government is no longer using the excise duty for its intended purpose, but to feed the state treasury instead. The duty hike will affect the economy as a whole, he added.
Saag explained that the difference between taxes and excise duties is that, in addition to its fiscal purposes, the latter also has regulative aims. “Excise is used to change the society by encouraging or limiting certain types of behavior.” Tobacco and alcohol serve as best examples of this practice – excise should help to curb their consumption by making them more expensive, while the gained money pays for prevention. Fuel excise no longer serves this aim, Saag said.
A Facebook event “No to fuel excise duty rise” (“Ei” Kütuseaktsiisi tõusule) has amassed more than 57,000 attends as of the afternoon of Thursday, April 16, although it remains unclear what the event itself entails. Another community with the same cause is approaching 20,000 supporters.