Higher excise duty and Tallinn sales tax will increase retail price of petrol and diesel fuel sold in Estonia will go up in 2010.
The higher excise duty on motor fuel that will enter into force from January 1 and the liquid fuel storage fee will add 0.48 cents a litre to petrol and 0.47 cents a litre to the price of diesel fuel, said fuel retailer Statoil.
In addition, the 1% sales tax that the City of Tallinn plans to introduce from 1 July 2010, would increase the price of motor fuel by another 15 to 20 cents a litre. According to Statoil, since taxes make up about 60% of the retail price of motor fuel, the increase will be passed on to the consumers.
Statoil says that it expects sales of diesel fuel to suffer from the fact that Estonia will have the highest excise duty for diesel fuel among neighbouring countries.
Fuel retail price increase also in 2009 because of another rise in fuel excise duties and raise in VAT rate from 18 to 20%.
In November, BBN reported that, according to Indrek Kaju, managing director of large fuel retailer Neste Eesti, the upcoming rise in fuel excise duty will lead to a drastic drop in fuel consumption in Estonia. Among others, Kaju said that the growing price of diesel means that most international road carriers will fill up outside Estonia.
Kaju said international road carriers are openly avoiding to fill up in countries where diesel is expensive. Since trucks can take up to 1,000 litres of diesel on board, it could be a significant loss to Estonian fuel retailers. He said that Lithuania was forced to lower its fuel excise duty to that of Poland in 2009 as a result of such boycott from international road carriers who started to buy fuel from Poland.
According to the new law on increasing excise duty on fuel adopted in November, the price of petrol will go up by around 3% and diesel fuel around 2.9% starting from January 2010.