Ministry rules out diesel excise cut as prices surge

Estonia’s Finance Ministry says it cannot lower the excise duty on diesel because of the country’s strained budget, ERR reported. Diesel prices have risen by 36 cents a litre in two weeks, prompting fuel sellers and hauliers to call for a tax cut.

Tiit Parik, head of Haanpaa, a logistics company belonging to French group Samat, said fuel costs account for about one-third of the company’s total expenses. The increase has made transport more expensive, he said, and companies have had to pass the costs on to customers through fuel surcharges.

Global demand for fuel exceeded supply by 2.8 million barrels a day in August, while reserves remain low. Diesel prices on the world market have risen by 36 cents a litre in two weeks because of the crisis in the Strait of Hormuz and the war in Ukraine.

Strong competition in Estonia has prevented fuel stations from raising prices by the same amount, said Alan Vaht, a board member of Terminal.

“Excise duty rates in Estonia are higher than in Latvia and Lithuania, but prices are lower. That speaks for itself: the price should be much higher,” Vaht said.

Vaht said the excise duty should be reduced to its minimum level to prevent the increase in diesel prices from reaching consumers. He estimated that this would reduce the price at the pump, including value-added tax, by about 12.2 cents a litre.

Parik said Estonia had suspended this year’s planned excise increase in the spring, while Sweden had cut its excise duty. He said the company’s vehicles in Sweden refuel there, meaning the excise duty and value-added tax on that fuel go to Sweden rather than Estonia.

However, the state cannot afford to reduce the fuel excise duty, said Evelyn Liivamägi, deputy secretary general at the Finance Ministry.

“For three months, that would mean more than 50 million euros. If petrol is added as well, the budget, as I think everyone is aware, does not currently allow such tax concessions,” Liivamägi said.

She also said the increase in fuel prices had not resulted in higher-than-expected value-added tax revenues. Fuel-related VAT revenue was about 60 million euros in both the first halves of 2025 and 2026, she said, because households have a limited amount of money to spend. If they spend more on fuel, they spend less elsewhere.

Farmers also face higher costs

Diesel is also an important input cost in agriculture, with high prices particularly affecting spring and autumn work.

Agricultural companies registered in the PRIA register may use specially marked blue diesel, which is 50 cents a litre cheaper because of its lower excise duty. However, the steady rise in prices over the past year has left farmers worried about the future.

Sargvere Agricultural Cooperative uses diesel to cultivate its land and collect feed for 400 dairy cows. Board member Toomas Uusmaa said the average price delivered to the cooperative had previously been about 60 cents a litre, while its latest order would probably cost around 1.30 euros a litre.

Uusmaa said the cooperative was trying to do all essential work while keeping land cultivation to a minimum. Grain drying and feed collection, however, could not be avoided.