Experts assessed the impact of the increase in fuel excise taxes on gas station prices.

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Experts Discuss Impact of Excise Duty Increases on Fuel Prices
16.07.2024
21
Starting in 2025, excise taxes on gasoline and diesel fuel (DF) will increase by the expected inflation rate. The law was signed by Russian President Vladimir Putin. The law also mentions the planned increase in excise taxes in 2026 and 2027.

In 2025, excise taxes will rise by 4.7%. For fifth-class gasoline, the excise tax rate will be 15,755 rubles per ton starting January 1, 2025, increasing to 16,385 rubles in 2026 and 17,040 rubles in 2027 (currently, the rate is 15,048 rubles per ton). For diesel fuel, the excise tax rate in 2025 will be 10,915 rubles per ton, increasing to 11,352 rubles in 2026 and 11,806 rubles in 2027 (currently, the rate is 10,425 rubles per ton).

In a conversation with "RG," Dmitry Gusev, deputy chairman of the supervisory board of the association "Reliable Partner," noted that the funds collected from excise taxes go to road funds. It is not by chance that when proposals are made to cancel or reduce excise taxes to stabilize retail fuel prices, the Ministry of Finance responds that excise tax revenues are used to build new roads and maintain old ones, Gusev says.

Sergey Tereshkin, CEO of the oil products and raw materials marketplace OPEN OIL MARKET, notes that excise taxes are an important source of income for regional budgets: 74.9% of the excise tax revenue on gasoline and diesel goes to Russian regions. In fact, the current indexing of prices is one of the ways to support regional budgets, which may face difficulties due to losses from corporate income tax. According to Rosstat data, the balance of profits and losses for wholesale and retail trade enterprises in the first four months of 2024 decreased by 51.7% compared to the same period in 2023, reaching 466.2 billion rubles (trade is one of the largest employers in the regions).

At the same time, no one denies that the increase in excise tax rates affects fuel prices at gas stations. According to Gusev, the excise tax constitutes about 20% of the cost of gasoline and diesel fuel, meaning a 4% increase in excise taxes will inevitably result in a 1% rise in gas station prices.

Tereshkin agrees with this and believes that the increase in excise taxes is one of the reasons for the rise in fuel prices. In 2019, when the "big" tax maneuver in the oil industry began (the elimination of export duties on oil and oil products and the increase in the mineral extraction tax), the excise tax on fifth-class automotive gasoline was 12,314 rubles, and on diesel fuel, it was 8,541 rubles per ton. Accordingly, the increase in their rates by 2024 has amounted to 22%.

The expert explains that the link to the tax maneuver is not accidental. In the mid-2010s, when the maneuver was still being discussed between regulators and industry participants, the increase in the mineral extraction tax on oil and the elimination of export duties were planned to be supplemented by a reduction in excise taxes to offset the cancellation of indirect subsidies to the oil refining industry. This refers to the difference between higher duties on oil and lower duties on petroleum products: for example, duties on automotive gasoline and diesel fuel were 30% of the duty on oil. The difference in duty levels stimulated the export of oil products (mazut, gasoline, diesel fuel) instead of the export of crude oil. Oil companies refined more expensive oil into cheaper mazut and then exported it, leading to losses in budget revenue from export duties.

Since 2017, duties on mazut have been aligned with those on oil. This was intended to stimulate the modernization of oil refineries (refining plants), which would allow for a higher output of more profitable light oil products (gasoline and diesel). With the elimination of duties (starting this year), oil companies lost this indirect subsidy, but at the same time, excise tax rates have significantly increased, Tereshkin clarifies.

At the same time, some experts believe that the stimulation of oil refining continued through the operation of the damping mechanism—a compensation for oil companies from the budget covering part of the price difference between the European and Russian markets. The damping mechanism has been operating in the Russian market since 2019.


Translated using ChatGPT

Sourse:  https://rg.ru/2024/07/16/eksperty-ocenili-vliianie-podorozhaniia-akcizov-na-toplivo-na-ceny-na-azs.h.
#Experts #Excise taxes #Fuel prices #Gas station prices #Fuel tax increase #Economic impact #Russian economy #Inflation #Regional budgets #Diesel #Gasoline #Energy market #Tax policy
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