Excise tax hike on fuel would weaken agricultural sector, says ministry

Increasing the excise tax on diesel fuel would not only enlarge the financial burden of agricultural workers but also affect the competitiveness of Latvian farmers, said the Ministry of Agriculture, assessing the proposal made by the Ministry of Transport Tālis Linkaits. 

At present, incentives for farmers to purchase diesel fuel is a significant state aid mechanism – it constitutes part of the benefits which encourage entrepreneurship in various agricultural sectors and “keeping alive Latvia's regions”, said the Minister of Agrciulture Kaspars Gerhards (National unity) in a press release on July 26. 

“The increase in excise tax will negatively affect the regional populations, who have in any case to travel long distances to get to work, to medical appointment, or to school, etc. Such a decision to promote the rehabilitation of the road infrastructure will place an additional financial burden on the population in the regions, which would in turn create an unwanted reason to developed centers and cities,” said Gerhards.

Moreover, raising excise duty rates on diesel fuel will enlarge the financial burden carried by farmers, since a large share of the cost of agricultural activity consists in purchasing diesel fuel for land cultivation and crop and livestock production. 

“Moreover, given that Latvia has so far had and still has one of the lowest levels of are payment in the EU, raising excise tax on diesel would further reduce the competitiveness of our farmers in the EU market. It will weaken the sector whose workers are providing domestic produce to Latvian residents and foreign markets, and whose export accounts for more than 20% of Latvia's total exports,” said the Minister. 

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