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Fuel tax subsidy halved from May

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The government has decided to continue subsidising fuel prices at the pumps by extending a reduction on consumption tax for another two months.

The Finance Ministry announced on Wednesday that the government will extend the reduction until the end of June but will be halving it.

As fuel prices reached their lowest ebb for a year, the new government was reportedly considering ending the freeze on consumer tax at the pumps, introduced last year.

However, the government decided to continue subsidising fuel prices but cutting the reduction in half.

Reduced rates were initially valid until June 2022 but were extended, with a reduction of 7 cents per litre in petrol, 8.3 cents for diesel and 6.4 cents for heating oil.

The previous government had extended the freeze twice, pushing the expiry date to 4 May.

From 5 May, the reduction will be 4.16 cents per litre for petrol and diesel and 3.19 for heating oil.

Announcing the cabinet’s decision, the Finance Ministry said: “The Government, assessing the positive effect on the reduction costs to motorists as well as households and businesses that use heating oil, decided to further contribute to alleviating the economic costs borne by consumers and businesses”.

The ministry said the loss of revenue from consumption tax and VAT from the implementation of the two-month extension is estimated at €5.96 mln.

“The measure will be continuously evaluated so that appropriate compensatory measures are taken depending on the developments,” said the ministry.

The tax freeze has cost the state €100 mln in lost revenue but offered drivers a respite from hiking prices.

Meanwhile, the government also announced on Wednesday that it will be, as expected, extending a subsidy on electricity bills introduced by the previous administration for another two months until the end of June.

The scheme was introduced in September to cover the increase in bills resulting from a government decision to reinstate VAT to 19% after lowering it to 9% for 10 months.

It provides discounted bills of up to €68.72 — and was to expire at the end of April – depending on the level of consumption.

The measure has benefitted some 449,000 households and 111,500 businesses. The estimated cost of the measure from September 2022 until April is €95 mln.

Another two-month extension will cost the government an additional €21 mln.