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. Several excise duties also have other goals, such as environmental and health-related considerations.
Emphasis on environmental 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 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. It should also be borne 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 in 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 2019, a total of EUR 7,197 million was collected in excise duties. The largest tax bracket for excise duties is in energy taxes, 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.
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 reduced tax rate for diesel fuel, the tax rate for light fuel oil for machinery (which is lower than for diesel), the lower electricity tax rate for industry and greenhouses, and the tax expenditures for energy-intensive industries. Data centres have also been subject to the lower electricity tax rate since 2014.
The general procedures for national excise taxation are laid down in the Excise Duty Act (182/2010, in Finnish). Detailed provisions are laid down in separate acts on each excise duty or group of excise duties. The Tax Administration is responsible for administering the excise duties.