Gasoline price hike – basic fins in dire straits

Increase in value added tax will increase the fuel price slightly. For the ruling party, the matter seems at odds with basic Finns.

The government's decision to increase the general value added tax rate from 24 to 25.5 also affects the price of fuel, which is important to many.

For a large section of the population, fuel is a so-called essential commodity, and its purchase is practically forced to continue despite rising prices.

Value Added Tax is a part of fuel price formation. Prices are also affected by excise duty which the government decided to reduce last year.

Research Professor specializing in Value Added Taxation at State Center for Economic Research Tuomas Kosonen Value Added Tax estimates that the increase will be visible at the gas pump.

– In an earlier study, the fuel tax was seen to be passed on to prices, and prices rose modestly, but not fully. That means nearly 75 percent of the increase went to prices.

– In this case, one can assume that the increase in value-added tax will pass through to prices to a large extent, but not completely, Kosonen observes.

So fuel sellers are not required to pass on the increase in value added tax to pump prices.

Kossonen did not make any calculations about the price effects, but he thinks an increase of 2-3 cents per liter is reasonable.

– In euros, the increase does not have a big impact when the increase is 1.5 percentage points.

As the tank fills up the increment becomes more concrete. For example, 50 liters of 95-octane fuel at Iltalehti's counter will cost 1.18 euros more after the VAT increase.

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According to Kossonen, an increase in value-added tax should not be reflected in pump prices, for example, in rising logistics costs.

– A common feature of value-added tax is that, at least in theory, it should not be repeated in the production chain.

Gasoline prices have traditionally been closely monitored. Under Leesima

What is the net effect?

Among the ruling parties, Basic Finns in particular, have been vocal in pushing for lower petrol prices.

Last year, basic fins influenced the reduction of fuel excise duty. Council of State According to

In practice, the increase in value added tax partially cancels out the effect of the reduction in excise duty on pump prices by 2-3 cents per litre. The net effect of these tax changes will be very small.

Additionally, it is important to note that the reduction in excise duty is intended to compensate for the increase in pump prices due to the increase in the obligation to distribute biofuels.

— As I understand it, there has been an attempt to make a mistake that, in a sense, the effects of a reduction in excise duty will be as great on prices as on changes in the duty of supply. If so, their net effect on prices would have been very small, Kossonen says.

A tough spot for basic Finns

Chairman of Basic Fins and Finance Minister Rika Burra At a press conference organized on Tuesday, he answered the question, how to justify the increase in fuel prices due to the increase in VAT to the voters of the basic Finns.

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– Burra opined that when the general value-added tax rate is raised, it targets the goods and services consumed in this society very broadly, and there are no restrictions.

Finance Minister Rika Burra has commented on the increase in the price of petrol at the press conference of the government. Jenny is the host

The effect of the value-added tax on fuel prices has prompted many opposition politicians to lend the base fins.

– Did someone forget to tell basic Finns that a VAT increase will also increase petrol prices? The Green Leader commented Sofia Virda.

– An increase in the VAT rate affects petrol prices to the same extent as the earlier reduction in excise duty on petrol. In other words, the central government MP said that the relaxation of fuel tax will be canceled in practice Tuomas Kettunen.

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