Increasing excise tax rates on fuel could lead to disastrous social consequences

The members of the Ukrainian Business Council, which includes 116 business associations from various sectors of the economy, analyzed the draft law submitted by the Cabinet of Ministers of Ukraine on Amendments to the Tax Code of Ukraine on Approximation of Ukrainian Legislation to the EU Legislation in the Part of Excise Tax(No. 11256) and note the following.

The Draft declares the harmonization of Ukrainian legislation with the EU legislation in order to implement the Association Agreement between Ukraine, on the one hand, and the European Union, the European Atomic Energy Community and their Member States, on the other hand), in terms of bringing excise tax rates closer to the minimum level established in the EU. The draft law provides for the establishment of new excise tax rates on fuel in line with the minimum level set by Directive 2003/96/EC, which will come into force in 2028. In particular, it is proposed to set the following excise tax rates for the main types of fuel: for gasoline - EUR 359 per 1000 liters, for diesel fuel - EUR 330 per 1000 liters, for liquefied gas - EUR 277 per 1000 liters.

At previous meetings of the Verkhovna Rada Committee on Finance, Taxation and Customs Policy, the working group that discussed this issue concluded that an increase in the excise tax is possible only after a strong argumentation, with detailed calculations by experts and ministries and agencies.

Business associations believe that it is unacceptable to propose an increase in excise tax rates on fuel without economic justification and without calculations of social consequences. An increase in excise taxes on fuel will lead to a jump in retail prices for gasoline, diesel fuel, and liquefied gas, which, in turn, will increase the cost of goods and services.

Representatives of business associations, the public, and experts from analytical companies believe that shock measures for the energy sector and consumers are counterproductive at a time when Ukraine's energy system is being systematically destroyed by the enemy.

Undoubtedly, the introduction of a system of balanced excise taxation of all energy products, as laid down in Council Directive 2003/96/EC on the restructuring of the Community system for the taxation of energy and electricity, is necessary, but wartime has its own peculiarities.

Ukrainian business calls on the Cabinet of Ministers and the Parliament to take a balanced approach to tax policy, to implement changes based on a qualitative cost-benefit analysis, taking into account the impact on citizens, businesses, the state budget, and with full public discussions.

The business calls for professional calculations and expert discussion on Draft Law No. 11256 with the participation of MPs, representatives of the Cabinet of Ministers, scientists, and business, and based on the results of the discussion, develop a balanced model of gradual growth of excise taxes that would minimize inflation, take into account environmental factors, and provide stability and predictability for investment activities.