Excise duty is an indirect tax on the consumption or use of a product. Excise duty is mainly levied for the purpose of supporting central government finances through tax revenues, but a number of excise duties also have other goals, such as environmental and health-related considerations.
Emphasis on environmentally and health based taxation
Excise duties have a key role in mitigating climate change. The goal is to seek solutions that promote climate objectives in the most economically effective way, accelerating the shift away from fossil fuels while meeting the requirements of social justice. It should also be borne in mind that taxation is not always the most effective solution to social challenges, and that systematic regulation and other guidance instruments are also needed. The tax on fuels used in transport, power plants and heating consists of an energy content tax and a carbon dioxide tax. The excise duty on beverage containers has encouraged the use of recyclable containers, and the waste tax has effectively reduced the amount of waste that ends up in landfills.
In 2022 a total of EUR 7,338 million was collected in excise duties. Energy taxes comprise the largest category of excise duties, with a total tax revenue of EUR 4,488 million in 2022. Other economically significant taxes are the excise duty on alcohol and alcoholic beverages and the excise duty on tobacco products.
Excise duties in the EU Member States are, as a rule, subject to harmonisation, as set out in EU directives. The directives are implemented through national taxation legislation. The harmonised excise duties apply to alcohol, most tobacco products, energy products and electricity.
Non-harmonised national excise duties include the duty on soft drinks, the duty on beverage containers, the energy tax on peat and tall oil, and the waste tax.
The system of excise duties also includes tax expenditures. The most significant energy tax expenditures concern the reduced tax rate for diesel fuels, the tax on light fuel oil for machinery (lower than for diesel), the lower electricity tax rate for e.g. industry, mining, greenhouses and energy-efficient data centres with a power capacity of at least 0.5 MW, and the energy tax refund (to be gradually phased out in 2021–2024) for energy-intensive companies.
The general taxation procedure for all excise duties was changed significantly from the start of 2021. The taxation procedure for excise duties will in future be regulated not only by the Excise Duty Act (182/2010) but also the Act on the Assessment Procedure for Self-Assessed Taxes (768/2016). Detailed provisions are laid down in separate acts on each excise duty or group of excise duties. The Finnish Tax Administration is responsible for administering the excise duties.