Estonian businesses urge government to assess impact of keeping diesel excise duty unchanged
As Latvia temporarily cuts its diesel excise tax from October 1 through year-end, Estonian transport and fuel industry groups are pressing their government to consider a similar move, warning of haulers shifting fuel purchases abroad, while the Finance Ministry deems that risk unlikely.
Organizations representing Estonia's transport, logistics and fuel sectors have called on the government to temporarily reduce the tax burden on fuel, primarily by lowering the diesel excise duty to the minimum level allowed within the European Union. The appeal follows Latvia's decision to cut its rate to 330 euros per 1,000 liters from October 1 through the end of the year. Estonia's current rate stands at 428 euros, meaning the gap reaches nearly 9.8 cents per liter, not counting turnover tax.
Krista-Maria Alas, head of the Estonian Fuel Transport Union, disagreed with arguments made by Finance Minister Jürgen Ligi. Speaking to ERR this week, the minister noted that Estonia's diesel excise rate is already relatively close to the EU minimum and remains an important source of state revenue. In his estimate, cutting the excise duty would lower retail fuel prices by only about five cents — a change he suggested consumers would barely notice, while the state budget, already facing a large deficit, would lose tens of millions of euros.
The minister also expressed skepticism about claims that fuel stations and tax revenue could shift toward Latvia, since fuel there, even after the excise cut, would still remain more expensive than in Estonia. He further questioned whether a tax reduction would be fully passed on to consumers through lower prices.
Taxes make up the largest share of fuel prices
Alas stressed that taxes currently account for the largest portion of the final fuel price. While she said she could not promise specific price outcomes since retailers set prices independently, she noted that market participants have confirmed that a lower tax burden would translate into lower fuel prices.
According to Alas, the issue extends beyond a few cents per liter. The government should also weigh the consequences of leaving the current rate unchanged, since a significant price gap prompts hauliers to refuel abroad — a concern especially relevant for companies engaged in international transport that purchase fuel in large volumes. As an example, she pointed to hauliers operating routes to Sweden who already refuel there, meaning all related diesel tax revenue is lost to Estonia.
The union currently has no quantitative estimate of the scale of the problem, but Alas urged the government and Finance Ministry to weigh potential budget losses from an excise cut against losses stemming from reduced fuel sales within Estonia.
Alas noted that the EU's minimum excise rate is not an absolute floor — in exceptional circumstances, a country may request a further reduction, an exemption already granted to Sweden, while several other countries have temporarily lowered excise duty or VAT on fuel.
