Cutting sales tax on fuel brings no benefits to haulage companies, who can in any case reclaim it, and even though their proposals for cutting diesel prices could be popular, the Finance Ministry sees no way of replacing the billions that would be lost to the budget.
Unlike most drivers, hauliers had no reason to be happy about the cuts in fuel VAT announced in October. "It improves our cash-flow at most," said Gábor Dittel, general secretary of the Hungarian branch of the International Haulage Association. The 5% cut, which brings a 10-12 forint cut in the price of a liter of fuel for the normal driver, brings no benefits to haulage companies, because they can reclaim the VAT they pay on fuel. Indeed, the VAT cut makes hauliers negotiating position even weaker - they would like to see a cut in excise tax, which they cannot reclaim.
Negotiations broke down in May, and an 18-point agreement signed in August - promising stricter fining of foreign hauliers, streamlined administration for domestic companies - will only come into force in 2006. Hauliers claim that fuel prices make up 40-50% of their "crippling expenses," and they are fighting tooth and nail for a HUF10 cut in the current excise tax on fuel of HUF85 per liter.
They calculate that Hungarian HGVs consume 2.7-28bn liters of fuel per year, but they only buy 2.2bn liters of this in Hungary. Péter Peredi of the National Haulage Association explains that drivers who go abroad only buy the absolute minimum in Hungary. If Hungarian fuel prices were more competitive, he says, Hungarian fuel consumption would rise by 200m liters a year, which would provide added revenue for the Hungarian treasury.
Hauliers stress that the EU throws up no barriers to cutting taxes. Minimum excise tax for fuel in the EU is €0.302, or HUF74. The tax would have to be cut for all drivers - hauliers cannot get a protectionist special tax band. "If we cut fuel prices for everyone, we estimate that the budget would lose some HUF50bn per year, and it's not clear how this shortfall could be covered," said Tibor Szanyi, political state secretary at the Ministry for Economics and Transport, explaining the real obstacle to cutting excise tax.
But the figures only partially justify the ministry's concerns. According to a think-tank, last year 2.73bn liters of vehicle fuel were consumed in Hungary. The cut that the hauliers are calling for would cut state revenues by HUG27bn. The state would lose a further HUF13bn due to the fact that VAT is charged on top of the price inclusive of excise tax - so a cut would reduce VAT revenues as well.
