The AMCU called on the government to lower fuel taxes due to the global crisis
7 August 14:51
The Antimonopoly Committee has proposed that the Cabinet of Ministers temporarily reduce certain tax components of fuel prices in light of the rapid rise in global prices. The Committee noted that taxes account for more than 40% of the retail price of gasoline and diesel fuel. This is stated in a press release from the Antimonopoly Committee, according to "Komersant Ukrainian".
It is noted that during the fuel crisis caused by the war between Israel and Iran, global indices and prices for light petroleum products rose by more than 100%. This affects retail prices at gas stations, as the purchase cost of fuel accounts for nearly half of its final price.
The other largest component of the retail price is the tax burden—value-added tax (VAT) and excise tax. Their combined share in the price structure exceeds 40%.
“Since VAT is calculated as a percentage of the customs value of fuel and excise tax, the significant increase in customs value since early spring has led to a corresponding substantial increase in the amount of VAT itself,” the statement reads.
In addition, the need to maintain minimum reserves of crude oil and petroleum products creates an additional financial burden. The AMCU believes that the simultaneous increase in purchase costs, the tax burden, and the costs of building reserves could worsen the competitive environment in the market. Small gas station chains are likely to be hit the hardest by this. According to the regulator, some companies may exit the market.
In light of this, the AMCU has submitted proposals to the Cabinet of Ministers to improve the government’s response to crisis situations in the fuel market. In particular, the Committee proposes considering mechanisms for temporarily adjusting certain tax components of the price of imported fuel during sharp spikes in global prices.
The AMCU also considers it appropriate to review the taxation mechanism for transactions related to the formation of minimum reserves of crude oil and petroleum products.
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VAT and excise taxes account for 40% of the retail price of gasoline and diesel fuel
The AMCU noted that it had analyzed the experience of other countries that responded to the crisis in the petroleum products market following the escalation of tensions in the Strait of Hormuz. According to the committee’s findings, competition law instruments alone are not capable of curbing price increases, whereas many countries temporarily adjusted their tax regimes.
The committee proposes improving tax policy for imported petroleum products during periods of sharp increases in global prices. In particular, it suggests considering the possibility of temporarily adjusting certain tax components in the price of fuel and changing the taxation mechanism for transactions related to the formation of minimum reserves of crude oil and petroleum products.
According to the AMCU’s estimates, VAT and excise taxes account for over 40% of the retail price of gasoline and diesel fuel, while the purchase cost makes up approximately half of the price. Since VAT is calculated based on the customs value of fuel and excise tax, an increase in the price of imported fuel automatically increases the tax burden.
The Commission warns that the simultaneous rise in purchase costs, taxes, and expenses related to maintaining mandatory fuel reserves is intensifying financial pressure on market participants. This could hit small gas station chains the hardest, as they will have fewer opportunities to compete on price.
According to the AMCU, this could lead to some companies exiting the market, a weakening of competition, and increased market concentration in the fuel sector.
Fuel Market Under Pressure
Ukraine’s import-dependent fuel market has come under pressure from several factors at once—the war in the Persian Gulf, fuel shortages in Europe, and logistical challenges.
A new wave of fuel price hikes in Ukraine began in mid-July amid rising global oil prices.
Previously, market participants had speculated that the government might resort to anti-crisis measures, including temporary tax cuts, a government cashback program, or price controls. At the same time, in early August, gas station operators reported that they were unaware of any such measures being prepared.
From March 20 to May 31, a government fuel cashback program was already in effect in Ukraine. According to the Ministry of Economy, 2.3 million Ukrainians took advantage of it. The reimbursement amounted to 15% of the cost of diesel fuel, 10% of gasoline, and 5% of liquefied petroleum gas.
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