Insane: Fuel in Hungary could be the most expensive in the region soon

Fuel prices have risen sharply over the past week and market forecasts suggest that oil prices will continue to trend upwards in the upcoming months. Meanwhile, in addition to VAT and excise duties, the Hungarian government is imposing a series of “hidden” taxes on petrol station operators. These operators are paying extra taxes on a scale not seen elsewhere in the EU. From next January, excise duty rates will increase significantly. This means that we will have the highest fuel prices of all the neighbouring countries. The government’s actions may backfire as over-taxation will probably reduce budget revenues.

As 24.hu reported, since the low point seen in mid-May, fuel prices at domestic petrol stations have risen spectacularly, especially in the past two weeks, when petrol prices have increased by an average of HUF 42 (EUR 0.11) and diesel by HUF 51 (EUR 0.13). The average price of diesel has risen to HUF 628 (EUR 1.62) since Friday, outstripping the price of petrol, which has risen to HUF 627. This sudden price rise is unique in that drivers have never before seen diesel prices rise by HUF 30 (EUR 0.08) in less than a week.

Despite that, according to the latest data from Eurostat, Hungary has the third lowest tax rate on fuel in the EU, despite record high VAT. The state collects 42 percent of the money from the sale of regular petrol. 41 percent of the money from diesel is in the form of excise duties and other indirect taxes. These are above 50 percent in most member states of the EU.

Higher excise tax on fuel

Forbes wrote that, in line with its EU obligation, the Hungarian government will increase excise duty on petrol and diesel by HUF 41 (EUR 0.11) gross per litre from January 2024. This would also increase the budget’s revenue figures. The government is likely to have committed to much more than what was demanded by the EU. Under EU rules, the level of excise duty for a given year must be calculated based on the euro exchange rate at the beginning of October of the previous year. Meanwhile, the Ministry of Finance has set the excise duty increase at HUF 425 (EUR 1.09) per litre. Experts say that fuel prices could be the highest in Hungary in the region. Prices could even reach the German level.

Huge backfire

Due to its geographical location, Hungary is a major transit country. So the largest share of fuel consumption at petrol stations is taken up by lorry drivers. Experts cannot have a precise estimate of the revenue loss if domestic fuel prices exceeded those of its western neighbours. However, experts suggest that the loss would be several hundred million litres per year.

Nothing could save the budget if domestic fuel prices are higher than in Austria and Slovenia. Internationally, these two countries are Hungary’s most important transit routes. If the fuel prices there are lower than here, a significant volume of traffic could be diverted away from Hungarian petrol stations. We must add that Austrian petrol and diesel prices were always higher than those in Hungary.