In the decree on the excise duty cut signed by the President of the Republic and published in the Official Journal, the expiry date of the measure that has kept the price of fuel stable in recent weeks is dated 10 May and not 22 May, as announced by Prime Minister Giorgia Meloni in the press conference.
However, the Government explained that the extension of the measure until the announced date is already planned, but will have to be delayed. In fact, the Executive needs time to find coverage, in particular to calculate the extra revenue that will derive from VAT on fuel.
The double date of the excise duty cut
The discrepancy between what Giorgia Meloni said in the press conference and what was contained in the actual decree on the excise duty cut published in the Official Journal emerged only when the definitive text of the law became public. Codacons immediately asked for clarification from the executive, who had assured that the cut would be for “three weeks”. The Prime Minister declared:
The Council of Ministers approved the extension of the excise duty cut for another three weeks. We did it with a difference compared to the past. There is a significant disproportion between the increase in diesel and the increase in petrol in recent weeks. Petrol increased by 6%, diesel by 24%.
However, the official text speaks of May 10th as the end date of the cut, with an allocation of around 146 million euros to cover the lost tax revenue normally coming from the sale of fuel.
What coverage is the Government waiting for?
The Government then explained that it is a question of coverage. The extension of the excise duty cut until May 22nd can be activated with a simple ministerial decree, without the need to go through the Council of Ministers again and without further approvals from Parliament in the future.
The Executive has simply given itself more time to find coverage, which in this case will derive from:
- Antitrust fines;
- the increase in revenues derived from VAT on fuel.
The problem lies in the second source of coverage. In addition to excise duties, in fact, fuel distributors also pay 22% VAT on the sale of petrol and diesel. Being a percentage tax, unlike excise duties which are fixed, VAT increases as the price increases.
This creates extra revenue that was not foreseen in the Budget law and which therefore can be used without spending cuts to reduce excise duties. However, it must be calculated, and given that the increases are very recent, this has not yet been possible. The Government will use the first days of May to calculate the extra VAT and certify the coverage.
Criticism of the excise duty cut
However, some observers have criticized the measure of cutting excise duties, because it would have a counterproductive effect: by decreasing the price at the pump, the demand for fuel increases. In this way the price in turn increases, making government spending ineffective.
The European Union had also advised, rather than reducing the price of fuel, to favor measures to reduce demand, so that consumers would buy less fuel, thus causing prices to fall. Some of the regulations that follow this line, implemented by other European countries to address the crisis, are:
- discounts on public transport, up to and including free;
- incentives to work from home to reduce travel;
- limitation of car circulation through alternate license plates.
