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
According to the Government Programme of Prime Minister Sanna Marin’s Government, taxation must reinforce sustainable development and the work to mitigate climate change, both nationally and interna-tionally in ways that are socially just and secure the tax base. The goal is to seek solutions that promote the Government’s 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.
Excise duties have a key role in mitigating climate change. In the taxation of fuels used in transport, the focus has already shifted towards 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 2019, a total of EUR 7,197 million was collected in excise duties. Energy taxes comprise the largest category of excise duties, with a total tax revenue of EUR 4,591 million in 2019. 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 du-ties 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 expendi-tures 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 industry, mining, greenhouses and over 5MW data centres, 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 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.