When the government hiked both the excise tax on petrol and the rate of VAT to 25% from 20%, fuel prices rose by a never before seen degree in Hungary. But car owners still cannot relax as another excise tax increase is on its way.
The summer tax changes were a double whammy for vehicle owners in Hungary, as the government - under severe pressure from the crisis - raised not only the excise tax on petrol but also the regular VAT rate. The former was hiked by HUF 5.5 to HUF 109 as per a litre of gasoline and to HUF 90.5 for diesel, while the retail price for these two fuel types went up by 7% or by HUF 19 and HUF 18, respectively.
The excise tax on fuel will be hiked further as of 1 January 2010 that will drive the price of gasoline and diesel HUF 11 and almost HUF 7 higher a litre, respectively. As VAT is levied also on the excise tax, the VAT burden will also increase while the rate itself is not to change.
Therefore, the price of a litre of gasoline will cost HUF 14 more than currently and we will need to pay HUF 9 more for a litre of diesel at the pumps from 1 January, unless global fuel rates do not change considerably from the present levels. These changes may either mute or aggravate the price hike ahead.
The increase in the retail price comes exclusively from the tax change and so fuel companies may decide to reduce their profit margin. We do not think, though that any margin cut will be substantial or last very long.
As a result of the higher excise tax, the tax content of a litre of gasoline will go up to 60% from 58% and that of diesel will increase to 55% from 54% as of 1 January 2010.
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