Cabinet should settle problem of counterfeit fuel before increase of excise duties, say experts
Kyiv, May 27 (Interfax-Ukraine) – The Ukrainian government should remove counterfeit fuel from the market before increasing the excise duties on fuel, experts and members of the public said at a press conference entitled "Increasing Excise Duties on Fuel: Why Does the Consumer Have to Pay More for 'Bootleg Gasoline'?" at Interfax-Ukraine on May 23, 2013.
The president of the Kyiv Motorist Club, Maksym Holovin, said that Ukravtodor proposes that the excise duties on main fuel by doubled, even though the market is already full of fuel of doubtful origin, from which the national budget and motorists suffer.
"Many filling stations are not selling the fuel they advertise… The problem is that there are not enough controls over fuel suppliers. Quality controls by the state and society should be toughened," he said.
An expert from the UPECO Consulting Company, Oleksandr Sirenko, said that excise duties in Ukraine are lower than those in Europe, and there is a chance that they could be increased. However, without the proper controls by the state, the increase in excise duties will only encourage suppliers of counterfeit fuel.
"Ukraine has the really low excise duties on fuel – we have space for [increasing them]… The question is something else – no one will give guarantees that an increase in excise duties will improve the quality of roads. The higher the price, the more incentives there is for supplying 'bootleg gasoline,' and in the past three years the state has not monitored the quality of fuel," he said.
Director of Kyiv-based A-95 consulting group, Serhiy Kuyun, also said that the simple increase in the excise duties on fuel will not allow the road construction fund to be replenished.
"Before increasing taxes, one should remove gaps, of which we have enough – at the end of 2012 the Finance Ministry assessed the volume of the shadow fuel market at over 900,000 tonnes… If they simply increase excise duties, taxes will start leaving the budget even quicker – if someone earns it will not be the state. The prices will grow: that of petrol by UAH 2 per liter, diesel fuel – by UAH 0.50 per liter and they don't forget about liquefied gas – by UAH 0.20 per liter," the expert said.
In turn, an independent expert of the energy market, Valentyn Zemliansky, said that the increase in excise duties on fuel would result in the fall in the sale of fuel due to low buying power of Ukrainians.
"Along with the larger shadow market we'll also receive the outflow of buyers… They don't take into account the transport compound of the country's economy – the prices of bread, sausages, etc depend on price of petrol. According to the most optimistic forecasts, the prices of the food will grow by 3-4%," he said.
The co-chairman of the Fund for Energy Strategies, Dmytro Marunich, said that it is unlikely that the increase in excise duties on fuel will be seen before presidential election of 2015.
"I'm sure that the resolution will not be passed in the form it appeared. The reason is that the election is soon. The resolution is just testing the ground," the expert said.
As reported, referring to media reports that Ukravtodor has initiated a draft law on doubling excise duties on petrol and diesel fuel. The Finance Ministry presented it to the Cabinet of Ministers. The document says that the excise duty on petrol will grow from EUR 198 to EUR 396 per tonne, while the duty on diesel fuel will rise from EUR 46-98 to EUR 92-196.
The funds raised will be spent on road repairs.