As primary measures to reduce fuel prices, two solutions are being considered — a reduction in the excise tax on fuel and a limitation on excess profits in fuel retail, Economy Minister Viktors Valains told the media on Tuesday.
On Tuesday, the government discussed possible solutions to reduce fuel prices, and according to the minister, they generally received support.
The minister noted that it is necessary to specifically prepare laws to temporarily reduce the excise tax on fuel and advance the issue of limiting excess profits for fuel retail networks. Valains emphasized that these are priority measures.
He expressed hope that the relevant mechanisms could come into effect as early as March.
Speaking about the criteria for launching these solutions, the minister noted that with a corresponding rise in fuel prices on international exchanges, the excise tax would automatically decrease to keep the price around 1.80 euros and prevent it from rising above this level. He indicated that this is the threshold, beyond which there is serious pressure on the economy if the price remains above this level for a long time.
Valains added that if the local price reaches around two euros, the first mechanism will be activated, followed by subsequent ones. According to him, from the residents' perspective, this could reduce the fuel price by up to 0.30 euros per liter, with the goal of preventing the threshold from exceeding 1.80 euros.
He noted that other countries use price caps; however, Latvia will employ an automatic mechanism through the excise tax, which will be activated during price fluctuations.
At the same time, on March 12, Valains informed the media representatives that considering the disagreements between the Ministry of Economics and fuel traders, it is planned to propose the introduction of a temporary tax on excess profits. This will allow for monitoring the market situation, and if the profits of market participants significantly exceed the normal level, excess profits will be collected in the form of taxes for the benefit of society using fiscal tools.
In Latvia's largest gas station networks, the average price of diesel fuel has increased by about 28% since the escalation of the conflict in the Middle East on February 28, while the price of 95 octane gasoline has risen by 11%.
