The government will submit a request to its creditors in September for the reduction of the special consumption tax on heating oil by 15 to 20 percent. If they consent, the final retail price of heating oil will drop by about 8 cents per liter this fall to reach 1.32 euros/lt, compared with 1.40 euros/lt in October 2013, provided oil prices remain the same.
Greece’s request may also include favorable regulations regarding the criteria for the heating oil benefit that will continue to be handed out to households which fulfill specific conditions concerning income and property.
A top Finance Ministry official said that the reduction of the special consumption tax will affect all kinds of consumers, but stressed that a necessary condition will be the continued implementation of reforms and the implementation of all prior actions. “If we [express reservations] on other issues, the negotiations on taxes will become more difficult,” he explained, as “talks will get harder should ministers move away from the agreed points.”
The data to be presented by the government to the troika of inspectors from the European Commission, the European Central Bank and the International Monetary Fund will show that the measure of bringing the special consumption tax on heating oil up to the level of that for diesel has failed, with losses for the state budget amounting to almost 400 million euros.
Should the government and the troika reach a deal, there will once again be two different tax rates, one for heating oil at 26.5 cents/lt and one for diesel at 33 cents/lt. Still, the difference in rates will again be an incentive for illegal trade but will harm the demand for diesel. Market professionals say that the measure has worked as in its first year of application, winter 2012-13, demand for diesel grew by 10 percent.
For the country’s creditors to accept the government’s request, Greece will also have to make sure that the new inflow-outflow systems are operating at all fuel stations, although at present the electronic system which is supposed to monitor them is not even operating in Attica.