Circle of Beneficiaries of Gas Excise Duty Concessions Should Be Larger

The Chamber and the Employers’ Confederation presented to the Finance Committee of the Parliament a proposal to decrease the gas intensity criterion established for qualifying for lower natural gas excise duty.

According to the current draft, 11 Estonian companies meet the criterion of high gas consumption company. Thus, such solution does not support the aim of the concession to increase the competitiveness of Estonian gas-intense companies, because many large high gas consumption companies cannot apply the concession aimed at them.

The draft would establish a lower excise duty rate for the natural gas consumed by companies who use high levels of natural gas. In order to be eligible for the concession, the company’s gas consumption intensity must be in an average at least 13% during the financial year preceding the application for the permit or the forecasted intensity for the next 12 months must exceed the 13% level. Intensity of gas consumption shows the share in percentage of the total cost of natural gas consumed by the company of the additional value created by the company. The calculations are verified by independent sworn auditors. Additionally, the company cannot be in difficulties and their energy management system must comply with the ISO 50001 standard, which shows that the company’s energy costs have been brought to a minimum.

So far, Estonia has not used the gas excise duty concession, which is common in the European Union. Furthermore, the gas network tariffs have increased as a result of decreasing consumption and thereby the final gas price has also risen, which has had a negative impact on the competitiveness of the Estonian processing industry.

The more expensive processing input makes the competitiveness of Estonian goods and services on export markets more complicated. Therefore, it is important that the decisions made to create a competitive advantage would be efficient and would not me made only as a gesture. The 11 companies referred to in the draft act who potentially meet the criteria of high gas consumption companies is too low a number to have a significant economic impact.

Based on the above, we requested the Parliament to start a change in the draft act reducing the gas intensity criterion established for qualifying for a lower excise duty rate from 13% to at least the average level of the “production of products of other non-ferrous minerals”, which during the years 2014-2016 was, according to the explanatory memorandum to the draft act, 3.6-6.3%. Furthermore, we proposed to reduce in the future the criterion for high electricity intensity to qualify for lower electricity excise duty.

The planned amendments enter into force on 1 January 2019.