Excise duty

Photo: Tuomas Marttila / Gorilla.

Excise duty is an indirect tax on the consumption or use of a product. Excise duty is mainly levied to increase the central government's income from taxes. Several excise duties also have goals related to e.g. environmental control.

Focus on taxation based on environmental and health issues

According to the Prime Minister Sanna Marin's Government Programme, taxation must reinforce sustainable development and work to mitigate climate change both nationally and internationally 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. On the other hand, it should bear in mind that taxation is not always the most effective solution to social challenges, and systematic regulation and other guidance instruments are also needed.

Excise duties are key in combating climate change. The focus of the taxation of fuels used in transport has already been moved towards a carbon dioxide tax. The excise duty on beverage packages has directed people to use recyclable packaging, and the tax on waste has effectively reduced the amount of waste that ends up in landfill.

In 2018, a total of €7,415 million in excise duties were collected. The largest excise tax bracket includes energy taxes, with a total tax revenue of €4,657 million in 2018. Economically significant taxes are also the excise duty on alcohol and alcoholic beverages and the excise duty on tobacco products.

Harmonised excise duties in the EU Member States are regulated by a directive. The directive is implemented via national legislation. The harmonised excise duties apply to alcohol and alcoholic beverages, most tobacco products, liquid fuels, electricity, and certain other fuels.

National non-harmonised excise duties are levied on soft drinks, beverage packages, and waste delivered to municipal landfill sites.

The system of excise duties also includes tax expenditures. The most significant energy tax expenditures include the lower tax rate for diesel fuel, the tax rate for light fuel oil for working machines that is lower than diesel, the lower electricity tax rate for industry, greenhouses and machine rooms and the tax expenditures for energy-intensive industries.

The general procedures for national excise taxation are regulated by the Act on Excise Duty. Each excise duty or group of excise duties is laid down in detail in its own Act. The Tax Administration is responsible for implementing the excise duties.