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Cut to fuel prices on Wednesday as taxes lowered

Cut to fuel prices on Wednesday as taxes lowered

by Reuben MALEKAR 2 min. 12.04.2022 From our online archive
Taxes make up just over 45% of the price at the pump
The price of a barrel of crude oil rate has risen about 26 percent so far this year
The price of a barrel of crude oil rate has risen about 26 percent so far this year
Photo credit: Photo Credit: Gerry Huberty

Luxembourg will cut the price of a litre of fuel by 7.5 cents as of Wednesday as the government ties up a €830m package of measures to tackle the energy crisis agreed between the government, employers and trade unions in March.

Like other countries, Luxembourg has experienced a rapid increase in fuel prices over the past four months - with traditionally cheaper diesel outpacing petrol - pushing up the cost of living because of consumer price inflation.

The Grand Duchy is known for its low fuel taxes with the highest number of cars per resident in the EU, who account for the highest level of carbon emissions compared to the size of its population.       

Yet since the start of the year, the price of petrol has risen by about 16% and that of diesel by 24%, according to data from the ministry of economic affairs, as the war in Ukraine exacerbated already existing market shortages.

The price of a barrel of oil is the main driver of the wild swings in fuel prices, over which the government has no influence. But just over 45% of the price drivers pay at the pump consists of taxes, which the government can vary.

Consumers need to pay a value-added tax (VAT) of 17% for petrol and diesel, in addition to excises duty, a form of tax levied on products such as alcohol, tobacco and fuel, which are regulated by the EU.

There are four different types of excise duties: the excise duty proper - which Belgium and Luxembourg levy together - a so-called autonomous excise, social contributions and an EU-wide carbon tax, which came into effect last year.

Luxembourg will reduce the autonomous excise by €63.51 per 1000 litres and the social contribution by €0.59 per 100 litres, according to Jean-Marc Zahlen, secretary-general of the Luxembourg Petroleum Group (GPL). Together this amounts to a reduction of €75 per 1000 litres, or 7.5 cents per litre for consumers. The VAT rate remains unchanged. 

"Filling a 50-litre tank would yield a €3.75 savings," the government said in a press release on Tuesday. 

The European Commission sets minimum rates for excise duties across Europe.  In Luxembourg, they currently stand at €0.52 for petrol and €0.41 for diesel for 2022 in Luxembourg, according to the Customs and Excise Agency. 

Excise duties remain stable regardless of the ups and downs of the market price of oil. It is only through the VAT that the Luxembourg government has seen some extra revenue from the increase since the beginning of the year.

Luxembourg first introduced the carbon tax in 2021, when it stood at €20 per tonne of fuel. This year, the tax went up by €5 per tonne.

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