New fuel taxes intended to raise 400 million euros over the next year will instead prompt a tax revenue shortage as a result of a further drop in market demand for fuel and increased illicit fuel trade, a study conducted by IOBE, the Foundation for Economic and Industrial Research, has forecast.
The IOBE study, commissioned by SEEPE, the Hellenic Petroleum Marketing Companies Association, will be officially presented on October 10.
The foundation’s study, factoring in various consumption level assumptions, fears the new fuel taxes, to begin with a hike on heating fuel tax as of October 15, will not produce the desired tax revenue results as a result of a further reduction in disposable incomes.
Experience has shown that tax revenues are negatively impacted whenever fuel taxes are hiked, the IOBE report notes, while adding an escalation in fuel smuggling practices could be sparked by the government’s new tax assault.
Heating fuel is expected to hit the market in less than two weeks, on October 15, at a price of 90 to 91 cents per liter, up 7 percent from last winter’s level of 84 to 85 cents, assuming no major crude price fluctuations take place until then. Such a prospect has not been ruled out by analysts.
The anticipated 7 percent increase in heating fuel is entirely the result of an increase in the special consumption tax (EFK) and the hike in the VAT rate imposed on the EFK tax. The VAT rate for fuel has been hiked to 24 percent. International crude prices, currently unchanged compared to last year, have nothing to do with the aforementioned heating fuel price estimate.
As of January 1, gasoline and diesel prices will also be sold at higher prices, by roughly 10 cents and 5 cents, respectively, per liter, representing respective increases of 9 percent and 4 percent, as a result of the EFK hike.
Last week’s decision by OPEC members to retain the cartel’s daily oil production level as of November is prompting an upward trajectory in prices. In addition, fears about the financial standing of Deutsche Bank are pressuring the euro currency against the dollar, meaning the EU’s common currency will not be able to absorb any international crude price increases.
The series of fuel price increases and overall domestic uncertainty could affect Greece’s GDP growth in 2017, the IOBE study warns. The government has set a GDP target growth rate of 2.7 percent for 2017.