Latvia extends reduced diesel excise tax until year-end

Latvia's parliament has approved extending a reduced excise tax rate on diesel fuel until the end of 2024, a move intended to cushion the economic impact of high fuel prices. The decision, made in its final reading, prolongs a support measure that was originally planned to end on June 30.

The reduced rate, implemented on April 1, lowered the excise tax from 467 euros to 396 euros per 1,000 liters. This adjustment aims to ease the burden on the economy and citizens. A separate rate of 21 euros per 1,000 liters applies to marked diesel fuel used in agriculture.

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although the situation shows some signs of stabilization, there are no guarantees of long-term stability, and fuel prices remain higher than before the conflict began.

Lawmakers cited ongoing instability in energy markets, influenced by geopolitical tensions, as the reason for extending the relief. While some stabilization has occurred, long-term certainty remains elusive, and fuel prices are still higher than before recent conflicts. The extension provides greater predictability for businesses and consumers.

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instability in energy markets persists, and maintaining the reduced excise tax helps ensure greater predictability and stability.

However, the Finance Ministry has cautioned about the potential impact on state revenue. Extending the reduced tax, with diesel prices above two euros per liter, could lead to a monthly revenue shortfall of around 2.4 million euros. The ministry suggested considering compensatory mechanisms if necessary.

Discussions in parliament also addressed the duration of the extension. Proponents argued that a longer period conserves administrative resources and can help curb inflation. They also noted the possibility of reassessing the measure if fuel prices were to significantly decrease.

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the extension of the excise tax reduction could cause a reduction in revenue of approximately 2.4 million euros per month.