Oil price hike increases VAT revenues

The increase in fuel prices since the outbreak of war in the Middle East in early March has also affected the increase in VAT revenues.

Before the end of March, the state coffers have been filled with 27.5 million euros, of which over 10 million euros are from VAT and 17.5 million from excise. Before the end of the month, VAT revenues have increased by 1 million euros more than in February.

According to Customs data, since the beginning of March, 50 million 527 thousand 171 liters of diesel have been imported into Kosovo, worth approximately 40 million euros, from which the state has benefited over 10 million euros from VAT and 17.5 million from excise duty.

Despite the fact that over 57 million liters were imported in February, with 7 days left until the end of March, VAT revenues were around 9 million euros, or almost 1 million euros less than in March.

Derivatives are the second most imported product in Kosovo. According to data from the Customs and Tax Administration (ATK), last year, diesel and gasoline worth 578 million euros were imported.

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From these products, the state coffers have been filled with 505 million euros or 17 percent of the revenues from these two institutions, of which 348 million from excise duty and 156 million from VAT.

At a time when the price of a liter of diesel has reached over 1.80 euros, business associations and political parties have demanded that the Government intervene by removing the excise tax or exempting it from VAT.

But the Minister of Trade, Mimoza Kusari-Lila, has said that these two requests are not currently an option, since for excise duty "the law must be changed", while for VAT "it is difficult to monitor".

Berat Rukiqi, who was once the president of the Chamber of Commerce (EOK) and is now a member of the Presidency of the Democratic League (LDK), said that the state could also take emergency action with excise taxes.

"Suspend it with an administrative instruction, do not remove the obligation, because it has no right, suspend it until a new situation and at the same time, use a differentiated VAT rate, which is allowed by an administrative instruction, since this is how the VAT Law was", emphasized Rukiqi.

But economist Edison Jakurti said that the Government should not abolish both at the same time. According to him, the Government should choose one of them, as he assessed that the most optimal is the abolition of VAT, since it offers a price reduction for consumers and at the same time the reduction in revenues is smaller.

"A simple simulation on the current price of around 1.70 euros per liter of diesel shows a clear trade-off between removing excise duty and VAT. Removing VAT (18%) would reduce the price to around 1.44 euros per liter (a reduction of around 15% or 26 cents), while removing excise duty (0.36 euros per liter) would reduce it to around 1.28 euros per liter (a reduction of around 25% or 42 cents). However, removing excise duty costs more than twice as much for the budget, but reduces the price only around 1.6 times more than VAT," he said.

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Countries in the region have already taken easing measures to reduce fuel prices.

Albania has reduced the excise tax on fuels by 20 percent, while North Macedonia has reduced VAT from 18 to 10 percent, for a period of two weeks.