Mild heating fuel demand rise seen, despite lower tax

The increase in consumption of heating fuel this winter season is expected to increase only modestly, by ten percent, despite a 30 percent tax reduction, according to trading company officials.

“I hope we’re proven wrong, but all our estimates lead to this percentage figure,” said Yiannis Psychogios, president of the Hellenic Petroleum Marketing Companies Association, locally refered to as SEEPE.

A tax increase on heating fuel a couple of years ago, to the tax level imposed on transportation fuel, achieved the move’s objective of clamping down on illicit fuel trade, but, at the same time, the heating fuel market was hit hard with thousands of households left unable to afford heating fuel, sector officials noted.

To avoid a new round of increased fuel smuggling activity – the lower price of heating fuel could tempt illicit trade for transportation use, as was the case prior to the tax hike on heating fuel a couple of years ago – sector companies recommend that an older study conducted by the Foundation for Economic and Industrial Research (IOBE) be implemented.

The IOBE study proposes offering heating fuel subsidies to all consumers, regardless of income levels or any other selective criteria. This would boost demand for heating fuel, the study noted, and increase tax revenues, which could be used to finance the subsidies. The current central bank governor, Yiannis Stournaras, until recently the country’s Finance Minister, headed IOBE at the time of the study.

Considering the increased risk of illicit fuel trade as a result of the tax decrease on heating fuel, an “inflow-outflow” tracking system for petrol stations, introduced recently by the Finance Ministry to monitor fuel purchases and sales as a means of combating fuel smuggling, needs to be fully implemented, other officials have noted. At present, just 32 percent of petrol stations are believed to be connected to the system and transferring their inflow-outflow details to the Finance Ministry’s General Secretariat of Information Systems.