Measures to subsidize fuel prices

Romania cuts fuel prices by 0.5 lei per liter for the next three months

Leyla Cheamil, 01.07.2022, 14:00

The government
in Bucharest on Thursday passed a bill for 0.5 RON subsidies
from the budget and fuel suppliers per liter of fuel. The decision was made for
citizens and companies to pay less on fuel, given the latest price spikes in
this commodity. The measure is valid
for the next three months and at the end of this period, the government is
expected to analyze a new set of measures if need be.

The government admits however that the
concrete implementation of the bill might be delayed for a while until suppliers
have updated their fiscal procedures. Moreover, the measure isn’t compulsory,
as fuel suppliers can choose whether to cut prices by 0.25% or not. However,
the Romanian Minister of the Economy, Virgil Popescu has given assurances that
the big chains of suppliers will apply the measure.

At the same time, authorities have pledged to monitor
fuel price evolution in the months of July, August and September and to sanction
any new hike under the ordinance of combating speculation. On the other hand, according
to state secretary with the Finance Ministry, Mihai Diaconu, the measure to
subsidize fuel will not increase the budget deficit.

According
to our estimates, the calculated impact of the 0.25% subsidy will be offset by
the fact that swollen prices would have dampened consumption. Lower consumption
would mean lower excise returns, and in principle we believe these could be
offset. The measure will boost the economy Diaconu went on to say.

He added that according to the Finance Ministry estimates,
state expenses will stay around 800 million lei, which will be added to the
other 800 million lei the suppliers aren’t going to pay as they will be offset
by their taxes and duties. The impact would have been bigger had the prices
gone higher, says Diaconu explaining the Ministry sought to find a simplified
mechanism to offset these subsidies granted to enterprises.

Within 15 days since the endorsement of the ordinance, through
an order by the ANAF president, fuel suppliers will be made available a model
of application. Then the subsidy will be applied according to their fiscal
duties, the VAT, corporate tax, etc.
We estimate that the offset will be done on the VAT side, Diaconu added.

(bill)