Tax revenue holds steady after fuel rebate extension


Tax revenue holds steady after fuel rebate extension

National finance

Lower diesel sales offset by higher petrol revenues, indicating that the extended summer discount has encouraged motorists to fill up in Luxembourg

Lower diesel sales offset by higher petrol revenues, indicating that the extended summer discount has encouraged motorists to fill up in Luxembourg

Fuel sellers feared the smaller price difference with Germany and other neighbors would make life harder for them

Photo credit: Gerry Huberty

Luxembourg’s tax revenue from fuel held steady in August, indicating that a rebate scheme aimed at encouraging motorists to fill up in the Grand Duchy – and not in neighboring countries that had similar incentives – paid dividends to the state coffers.

Taxes collected by the Customs and Excise Authority last month – which cover a range of items including fuel sold at the pump – were nearly 6% higher than in the same month a year ago, Finance Minister Yuricko Backes said Monday during a closed parliamentary committee meeting. .

Although there was a 6% annual drop in diesel sales in August, this was offset by an increase in revenue from taxes on petrol and goods sold at service stations such as tobacco, while that revenues have generally benefited from the rise in prices.

In July, government ministers agreed to extend a 7.5 cent per liter rebate on petrol and diesel sold in the country for another month until the end of August. The move was seen as preventing a month-long rush of motorists refueling in neighboring Germany, where a similar fuel discount was in place.

The Grand Duchy had been keen not to lose its advantage as a cheap fuel haven, an important source of revenue for the country, as neighboring countries introduced subsidies. The Luxembourg oil sector employs around 2,600 people and pays 2 billion euros each year into the state coffers through taxes on fuel, as well as cigarettes, coffee and spirits also sold at the pump.

Luxembourg subsidized fuel this year as part of an 800 million euro deal to mitigate the impact of inflation on consumers.

However, Luxembourg’s grant was not extended beyond the summer as the country aims to stay the course on its climate targets.

“The objective is that in the medium term, fewer people than today come from abroad to Luxembourg to refuel,” Energy Minister Claude Turmes said earlier this month, confirming the end of the device.

Total government revenue rose almost 10% in August from a year earlier, Backes noted, reaching 15.7 billion euros. The increase in taxes allowed the government to record a budget surplus of 969 million euros at the end of August.

VAT receipts increased by 9.6% while payroll taxes increased by more than 15% on the year, which the Minister of Finance attributed to a “growing labor market and a historically low unemployment.

However, Backes reiterated a warning that the country’s financial coffers are set to be plundered in the coming months, due to measures such as a 15% cap on gas price increases announced last week.

Before the announcement of the latest package of measures – which is expected to cost the government around 1 billion euros – the aid measures already announced risked leading to a public deficit of between 1 and 1.5 billion euros by the end of the year, according to figures from the Ministry of Finance.


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