Latvia’s government on Tuesday approved a draft law to reduce excise tax on diesel fuel by approximately 15%, a move intended to mitigate the impact of rising fuel prices on the national economy and residents.
The Finance Ministry estimates the reduction could lower diesel prices by around 8.6 cents per liter, including value-added tax.
According to a proposal from the Finance Ministry, the excise tax rate on diesel fuel will be lowered from 467 euros to 396 euros per 1,000 liters.
The government also approved a reduction in excise tax on marked diesel fuel for agricultural use. The excise tax rate for this fuel will decrease from 70 euros to 21 euros per 1,000 liters.
The Finance Ministry estimates this will lower the price of marked diesel fuel by approximately 5.9 cents per liter, including value-added tax.
The reduced excise tax rates for both diesel fuel and marked diesel fuel used in agriculture are scheduled to be in effect from April 1, 2026, to June 30, 2026.
During a press conference following the government session, Finance Minister Arvils Ašeradens explained that the government is currently receiving an additional 6.7 million euros per month in tax revenue due to rising fuel prices.
Ašeradens stated that the government’s intervention in the fuel market over three months will amount to 20 million euros and will be fiscally neutral, as it will be offset by the additional revenue. The reduction in excise tax on marked diesel fuel for farmers is also expected to be fiscally neutral, according to the Ministry of Agriculture.
Regarding a potential reduction in the excise tax rate on gasoline, Ašeradens said that the situation with gasoline prices is being closely monitored and the Ministry of Economy will inform the government about it every two weeks.
“If the situation develops in an undesirable direction, the gasoline excise rate will also be evaluated,” Ašeradens said. He added that he has already informed the finance ministers of Lithuania and Estonia about the government’s decisions, and will inform the remaining European countries’ finance ministers next week to coordinate mutual action.
The Finance Minister added that if fuel prices continue to rise, other compensatory measures will be considered, but Ašeradens believes they must be fiscally neutral.
The Finance Ministry notes that after the reduction, Latvia will have the lowest excise duty rate on diesel in the Baltic states.
Currently, the lowest excise duty rate on diesel in the Baltics is in Estonia – 428 euros per 1,000 liters, even as in Lithuania it is 553.6 euros.
Simultaneously, the Baltic states – Lithuania, Estonia and Latvia – are coordinating action to mitigate market shocks and the impact of fuel prices on residents. Estonia had initially planned to increase the excise duty on fuel from May 1, but is now planning to abandon this step, while Lithuania is moving towards similar solutions as Latvia, the Finance Ministry informed.
The prepared draft law provides a temporary solution to an emergency situation caused by global oil supply disruptions. Since the end of February, both oil and fuel prices have increased significantly – in Latvia, the retail price of diesel fuel has increased by approximately 30%, reaching around two euros per liter.
The Finance Ministry notes that rising fuel prices create a significant burden on both businesses and households, as well as affecting the operation of the public sector, including emergency medical assistance, security and defense services. The Finance Ministry’s calculations show that without intervention, additional costs to the Latvian economy could reach around 50 million euros per month.
At the same time, the Finance Ministry forecasts that the fiscal impact of reducing the excise tax on the state budget could be close to neutral, as rising fuel prices increase value-added tax revenues.
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