At the height of the price crisis, fuel is expected to face an additional €40 million in annual fiscal costs as a result of the introduction of a new fee. The government assumes that it will be set at 3 lekë per liter.
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Revenue from the new fee on fuel will be used to finance the creation and management of the security reserve of crude oil and its by-products.
However, increasing the fiscal burden on fuel will further raise the final retail price for consumers. The government itself acknowledges the impact on the increase in the final retail price for consumers.
In the explanatory report accompanying the draft law “On the creation, maintenance and management of crude oil and its by-products,” the government assumes that if the fee for the oil security reserve is set at 3 lekë per liter, it will generate 3.75 billion lekë in annual revenue.
The revenue will be used to purchase reserve fuel, cover storage costs and other expenses.
However, the draft’s explanatory report clarifies that the level of 3 lekë per liter is only an assumption, as the final amount will be approved by a decision of the Council of Ministers, based on proposals from the responsible ministries.
The reserve is expected to be created over a five-year period, bringing the financial impact of revenue collection from the fee to approximately €200 million.
“To finance the creation, maintenance and management of the security reserves of oil and its by-products, the introduction of a fee for this purpose has also been envisaged.
The fees for creating and maintaining the security reserve, applied to quantities of hydrocarbon energy products subject to the obligation to pay excise tax, in accordance with Law No. 61/2012, dated 24 May 2012, ‘On excise duties in the Republic of Albania,’ as amended, will be determined annually by a decision of the Council of Ministers.
All these activities will entail additional costs for the public sector to cover expenses related to the creation, storage, maintenance and inspection of the security reserves, as well as other regular activities of the authority.
Securing the funds will require, among other things, the introduction of a fee to be applied to quantities of hydrocarbon energy products. This will increase the value along the chain of financial charges and, ultimately, the final sale price for consumers,” the explanatory report states.
The introduction of another fee on fuel is expected to increase the final retail price by a further 3 lekë per liter.
Currently, fuel in the country is subject to several taxes and fees, including VAT, excise duty, the circulation tax, the carbon tax, the scanning fee, municipal taxes and the relicensing fee.
Taxes account for 53% of the final fuel price, or an estimated 90 to 100 lekë of the final price. Compared with the countries of the region, Albania has the highest fiscal burden on fuel.
In countries such as North Macedonia, Serbia, Montenegro and Kosovo, only excise duty and VAT are calculated on the wholesale price of fuel.
If fuel products were relieved of the fiscal burden, domestic consumers would pay prices similar to those paid in countries across the region.
High fuel prices: Albanians pay twice as much in taxes per liter as the region, while other countries are reducing them
The cost of creating the reserve reaches up to €42 million a year
According to indicative data, the volume of the security reserve is estimated at between 43,600 and 49,000 tons a year, including crude oil and its by-products—diesel, gasoline, jet fuel and liquefied gas.
One of the scenarios calculated by the government involves creating a reserve of 43,600 tons of fuel. Crude oil would account for the largest share, at 17,400 tons. Diesel would amount to 13,000 tons and gasoline to 8,720 tons. Smaller quantities of liquefied gas and jet fuel are also envisaged.
The government estimates that the cost of purchasing the fuel alone will be €39.4 million a year, while storage will cost €2.6 million a year.
The oil reserve will be managed by a State Authority. The cost of establishing the authority is estimated at 60 million lekë, while its operating costs are estimated at 220 million lekë a year, according to the scenarios presented in the explanatory report.
The Hydrocarbons Association previously raised concerns about how the government plans to finance the new model proposed for creating the oil security reserve.
The Hydrocarbons Association says that the fee to finance the creation of the reserve should be considered a hidden tax, since it does not involve a service provided by the state to companies, but rather the financing of a public obligation through a fee imposed on fuel.
“Hidden tax” on fuel for the security reserve will raise prices, government admits
The draft law also gives the state-owned company, the Authority for the Oil Security Reserve, the right to buy and sell fuel without public procurement, that is, without a tender.
This arrangement is justified by the specific nature of how the reserve operates. The authority’s right to purchase and sell fuel without public procurement is set out in one of the points of Article 10 of the draft law “On the creation, maintenance and management of the minimum security reserves of crude oil and its by-products.”
The oil reserve will be provided through a “concession”; services will be contracted without procurement
Cost data
Indicative minimum reserve fee: 3 lekë per liter per year, until the reserve is fully created, covering the purchase of hydrocarbons and storage.
After the reserve has been created, only its storage costs will be paid. The authority’s annual revenue from the fee: 3.4–3.6–3.75 billion lekë per year.
This amount will fully cover the authority’s operations and the securing of the reserves, assuming they are created over a five-year period, as well as the costs of maintaining the stored product.
Based also on the opinion of the Ministry of Finance, the one-time initial cost of developing a system for collecting the fee will be 20–30 million lekë. The annual maintenance cost of the system will be 8–12 million lekë.
