The Ukrainian government has decided to introduce compensation for part of the fuel expenses for the population in response to the sharp rise in gasoline and diesel prices. Instead of reducing excise taxes and VAT, which account for more than half of the retail price, the cashback mechanism was chosen to support citizens.
This is reported by Finway
Reasons for Rejecting Fuel Tax Reductions
Minister of Economy, Environment, and Agriculture Oleksiy Sobolev emphasized that reducing the tax burden on fuel would threaten military funding. According to him, the example of some European countries that have implemented changes to excise taxes is not suitable for Ukraine due to the need to ensure defense.
“We considered various options to mitigate the price shock. The changes to excise taxes implemented by some European countries: Italy, Spain, Austria – would directly impact the army and reduce defense funding,” the minister noted.
He also pointed out that the biggest beneficiaries of the tax reductions would be owners of multiple vehicles, while state price regulation could lead to fuel shortages and market disruptions.
Conditions for Receiving Compensation and Its Impact
The government chose the cashback option, under which from March 20 to May 1, Ukrainians can receive partial compensation for fuel purchased at gas stations: 15% of the cost of diesel, 10% of gasoline, 5% of autogas, but no more than 1000 hryvnias per month.
According to Sobolev, this program costs the budget 20 million hryvnias daily, or about 600 million hryvnias per month. At the same time, funding is carried out through the redistribution of funds from the Ministry of Economy, without additional burden on the state budget.
The funds received can be spent by Ukrainians on utility payments, purchasing domestic food products, books, medications, as well as for charity. As the minister emphasized, 75% of the cashback is directed specifically towards utility payments.
Sobolev noted that this initiative is particularly beneficial for those who need support the most, and it also contributes to stabilizing the energy sector and reducing the debts of the company “Naftogaz.”