Gov’t to return heating oil tax cuts to talks table

The government will include a reduction in the special consumption tax on heating oil in its package of tax relief measures to be negotiated with the country’s creditors from September, despite previous rejections by the lenders.

Finance Ministry officials say that the measure of leveling the tax on heating oil with that on diesel has failed, leading to revenue losses of nearly 400 million euros for the state coffers.

The issue’s return to the forefront comes after a change at the ministry’s helm, as former minister Yannis Stournaras had opposed any adjustments to the special consumption tax on heating oil, stressing repeatedly that such a move should only be contemplated “once we have combated the illegal trade in shipping fuel.”

Now the ministry is dissociating the illegal fuel trade from the leveling of the taxes on heating oil and diesel without having issued any data on whether the measure has in fact helped to rein in black market activities. Market professionals say that the measure has helped and note that in the first year of the measure’s application diesel sales grew by 10 percent.

Data from the General State Accounting Office show that consumption declined by 71 percent and revenues from the special tax expanded by 59.2 percent in the first year of the measure’s application (2012-13). In the second year (last winter), consumption climbed 12.84 percent on an annual basis to reach about one-third of consumption in 2011-12.

However, while revenues from the special tax increased, lost revenues from value-added tax on fuel were much greater, amounting to 400 million euros, creating a significant hole in the budget.

All the data will be presented to the creditors’ representatives in September, along with a new plan regarding the reduction of the tax rates on heating oil and a cut in income tax rates. If a deal is reached, heating oil could be significantly cheaper this coming winter.