Greece is facing a growing fiscal challenge as soaring fuel prices force households to cut consumption, reducing state revenue from fuel excise taxes despite the budget surplus recorded in recent months.
The government has announced subsidies to help households and businesses cope with high energy costs, but questions remain over how much relief the measures will provide, how long they can be sustained and what will happen if the energy crisis triggered by the war in the Middle East continues.
According to data reported by To BHMA tis Kyriakis, the decline in fuel consumption has already translated into an estimated €200 million in lost revenue from the Special Consumption Tax, Greece’s excise tax on fuel. Some of the shortfall is offset by higher value-added tax (VAT) receipts, which rise as fuel prices increase.
Fuel sales fall as consumers cut spending
Nikos Papageorgiou, president of the Attica Association of Fuel Station Owners and Traders, said demand has declined for both diesel and gasoline, with the steepest drop affecting regular unleaded gasoline.
Some fuel station operators have stopped ordering, or have sharply reduced their supplies of, more expensive high-octane fuels, such as 98- and 100-octane gasoline. According to Papageorgiou, demand for these products has become almost nonexistent on days when stations are not offering discounts.
He also described a recurring pattern in monthly fuel sales. Demand remains relatively steady during the first half of the month, when salaries and pensions are paid, but falls after the 15th.
Compared with previous years, consumption during the second half of the month has dropped by more than 15% for regular unleaded gasoline and by 7% for automotive diesel, Papageorgiou said.
The decline is affecting government revenue because the Special Consumption Tax is charged as a fixed amount per liter rather than as a percentage of the retail price. VAT, by contrast, generates more revenue when prices rise, partially offsetting the losses from lower sales volumes.
Heating oil market faces uncertainty
The outlook for heating oil is particularly uncertain as the winter heating season approaches.
Papageorgiou said that when heating oil prices exceeded €1.60 per liter last year, sales effectively came to a standstill, causing state revenue from the fuel to plunge.
The excise tax on heating oil is 28 cents per liter, compared with 70 cents per liter for regular unleaded gasoline and 41 cents per liter for automotive diesel.
Papageorgiou expects fuel sales to decline significantly in September, with the downturn likely to be reflected in the state budget’s revenue figures.
Budget figures do not yet show the full impact
Preliminary figures released last Thursday by Greece’s Ministry of National Economy and Finance showed that the state budget’s net revenue totaled €6.483 billion in the previous month, exceeding the monthly target by €194 million.
Tax revenue reached €6.591 billion, €179 million, or 2.8%, above the target.
However, the ministry said the precise breakdown of revenue by category would be available only when the final budget execution report is published, expected toward the end of the month. As a result, there are not yet official figures showing whether, or by how much, revenue from fuel excise taxes has declined.
The preliminary figures therefore do not establish the full effect of lower fuel consumption on the state’s finances.
Government expands fuel subsidies
To ease the burden of high fuel prices on households and professionals, the government has announced three direct subsidies at the pump for the second half of October.
The measures provide:
- Heating oil: A subsidy of 20 cents per liter from Oct. 15 through Oct. 31.
- Automotive diesel: A subsidy of 15 cents per liter, increased from the 10-cent subsidy in place in September. The higher rate applies from Oct. 1 and is being extended.
- 95-octane unleaded gasoline: A subsidy of 10 cents per liter from Oct. 17. The discount had previously been funded by refineries, but the state budget will now cover the cost.
- The subsidies are applied directly to the retail price, without requiring applications or imposing income-based eligibility criteria. The government says this allows consumers to receive the benefit immediately.
The three measures are expected to cost €46 million for the second half of October.
When the government subsidies are combined with support provided by refineries, the total discount will reach 40 cents per liter for heating oil and 20 cents per liter for automotive diesel. For regular unleaded gasoline, the discount available to consumers will remain at 10 cents per liter.
The measures are intended to cushion the impact of high fuel prices, but the extent of the relief and the effect of falling consumption on public revenue will become clearer as more complete budget data become available.
Source: tovima.com
