Fuel excise between the army, roads, populists and lobbyists
The government sent to the parliament a draft law on the partial restoration of excise duties on motor fuels. It is proposed to introduce a unified rate of 100 euros per 1,000 liters of gasoline, diesel and liquefied gas (before the cancellation in March, they were 213, 139.5 and 52 euros, respectively).
The initiator of this expected move was the Ministry of Infrastructure, which argued the need to return taxes with an empty road fund, which is needed to maintain and restore road infrastructure.
However, the draft law stumbled immediately upon reaching the Verkhovna Rada: in two attempts, the chamber failed to include it in the agenda. Further discussions highlighted three key issues of concern to MPs: price implications, earmarking and a new approach to uniform excise duties. The public review of the draft law once again gave an opportunity to talk about the short memory of politicians and the strangeness of their logic. And also about the fact that everyone wants to have roads and a strong army, but no one particularly wants to pay for it.
Was it necessary to abolish excise duties?
The issues crystallized during a special online discussion chaired by People’s Deputy Yaroslav Zheleznyak, to which People’s Deputies, government officials and representatives of specialized associations were invited.
to raise excise taxes in March, because, they say, apart from budget losses, it didn’t give anything. Opponents of the government in the parliament consider the same government’s intention to at least partially renew excise duties as a recognition of its March mistakes. Prices have risen, shortages have not been avoided, and traders have pocketed that excise duty — such is the rhetoric.
Let’s remember those times. March. Due to the war in Ukraine, oil prices soared by 40% to $140. per barrel The calculations showed that the prices for the speakers were approaching 50 hryvnias/l. It’s a blessing now, but at the time it was a shock. The government decides to abolish excise duties and reduce VAT from 20% to 7% to reduce the pressure on consumers.
The thesis that no one seems to have felt this generosity seems very strange. It does not. At that time, state price regulation was in effect, and zero excise duty and reduced VAT were immediately, even retroactively, included in the formula, and the estimated UAH 50 turned into UAH 38-40/l. And this calculation remained until May 17, until the state walk was canceled. So, people really saved. Free money was spent, in particular, on the army.
Deficit. And in what way could the excise tax prevent this? If the tax remained, wouldn’t more than 30 rockets have landed in Kremenchuk? Would the oil depots not be bombed? Would a narrow European railway track be expanded to the Ukrainian one, so that it would be possible to bring imported fuel faster?..
Rising prices. Yes, it happened. Due to shortage. Supply and demand is nothing new. This is how any market works, at least look at the world market. There, prices jump not because of missile attacks, but simply because of the expectation of a strike in some port. Or simply because of someone’s expectations or fears. Why did it have to be different for us?
In order to flood the market, our importers paid any price to European suppliers (nothing personal, just business). Prizes amounted to more than 300 dollars. by the ton! Today, due to the saturation of the market, speculative euro mark-ups have fallen to 130-150 USD/ton, but this is not the pre-war 20-30 USD.
The logistics of supplies across the western border have also increased several times: agree, there is a difference in the distance from Kyiv to Kremenchuk and to Uzhgorod. Separate batches of gasoline go to us from Belgium(!) and the Netherlands.
Of course, let’s not forget about the 25 percent appreciation of the dollar. Therefore, it is necessary to compare fuel prices before the war and now accordingly.
Loss of taxes. And this still needs to be calculated. Yes, there was no excise tax, VAT was reduced. But. Many of my interlocutors from the market say that they have never paid so much VAT. Because before it was “twisted” due to fictitious sales, left checks, etc. Often, the state also reimbursed them for VAT. And when the tax fell to 7%, the point of doing it disappeared. We still need to see what the statistics are.
And now let’s remember about the income tax (PnP). Yes, the trader guys had good margins. But, first of all, there were no former sales volumes, firstly due to the deficit, and then due to the drop in consumption. Therefore, it was not destined to become very rich.
Second, a good margin — there should be a good income tax. Even if someone had UAH 20 per liter, it is almost UAH 4 PnP. Such was the excise tax on diesel fuel before, not to mention the two unfortunate hryvnia excise tax on liquefied gas. And the margins of gas importers in May reached exactly 20 hryvnias/l (isn’t that right, dear friends – suppliers of “social” fuel?). If someone in the parliament or the government does not see these taxes, then you should ask the tax officials.
After all, was it necessary to help consumers? This is a common European practice. Excise taxes and VAT were cut at the beginning of the year in Poland, subsidies are provided by the governments of Germany and France. Yes, there is no war in these countries, but this does not mean that our consumers should be forgotten. Therefore, such a step cannot be considered a mistake.
Pseudo-burial of liquefied gas
The issue of uniform excise duty rates was the second most important. This is a truly revolutionary step – 100 for everyone (euro for 1000 liters). After all, for the last 12 years, the tax burden on gas was four times lower than on gasoline.
Liquefied gas will die! Sellers of more expensive gasoline demand equalization of taxes in order to get rich! There are no unified excise taxes anywhere in the world! The European directives of 2003 advise completely differently!
You have listened to the rhetoric of the liquefied gas sellers and their long-time allies in the parliament, the European Solidarity faction. Some people’s deputies have the same fears, who believe that only impoverished motorists use liquefied gas (and only the rich use gasoline).
All this nonsense disappears when you realize one fact. The unified excise tax — zero euros on all brands of fuel — has been in effect for five months, and it has not led to the disappearance of liquefied gas, nor even to a loss of its attractiveness relative to gasoline. If on February 23 the ratio of prices in retail trade was 53% (18.84 UAH per liter of gas against 35.48 UAH per liter of gasoline), then on August 25 it was 52.6% (26.22 against 49.86 UAH/l ).
What are the threats from the unified excise tax?
Attempts to appeal to the European directives of 2003, which require preferential taxation of liquefied gas, cannot be called manipulation. In the 20 years that have passed since then, Europe consumes almost no liquefied gas in transport, while Ukraine has 30% of autogas in the basket of motor fuels. In fact, this is a “fuel” offshore, where everyone who could has already fled. So what is left for Ukraine to watch as money flows out of the budget and continue to increase taxes for consumers of gasoline and diesel fuel? Where is the justice? Why would a “gasoline” car owner pay for four armored vests for the army, and one “on gas”? And on diesel – two.
Uniform rates establish social justice, because the tax burden on everyone will be equal. Each car owner will finance the same number of bulletproof vests or road meters. By the way, it is possible that the excise taxes will be directed to the general fund of the budget, and not to the road fund, as was the case before. Deputies openly say that they want to distance themselves from the unpleasant trail that follows the “Big Construction”.
The mentioned discussion showed an interesting picture: everyone wants to have roads and a strong army, but there is no desire to pay for it. Everyone seems to understand everything, but European directives, difficult situation, etc., etc., etc. do not allow payment.
Horror, but suddenly the prices will rise?! This cannot be ruled out either, because the world market continues to be feverish mainly because of the war in Ukraine. So we have to give up funding for the army and roads because of this?
We are dealing with a typical Ukrainian story, when due to populism, unprofessionalism and counting pennies, we risk losing millions and the lives of Ukrainians.
Source: https://zn.ua/ukr/macrolevel/palivnij-aktsiz-mizh-armijeju-dorohami-populistami-ta-lobistami.html
