Excise duties on fuel, non-alcoholic and alcoholic beverages to rise next year

RIGA - Excise duties on fuel, non-alcoholic and alcoholic beverages will go up next year, while excise duty on tobacco products will be raised from 2027 in accordance with draft amendments to the Law on Excise Duty, approved by the government on Tuesday. 

The Finance Ministry, which drafted the amendments, said that the excise duty rates had to be revised in order to partly compensate for the reduction in labor tax revenues and to increase budget income, especially in the current context of critical funding needs for external and internal security and other key measures.

The planned changes are expected to raise EUR 42.87 million for the state budget in 2025.

The changes in excise duty rates will result in a 3.2 cent annual increase in the price of one liter of diesel in 2025 and 2026, and a 2.7 cent annual increase in the price of lead-free gasoline. The price of one liter of car gas could rise by 1.9 cents per year in 2025 and 2026.

According to the Finance Ministry, the tax changes would thus increase costs for commercial transport by around 64 cents per 100 kilometers, assuming that the average diesel consumption per 100 kilometers is 20 liters.

The excise duty exemption for oil products used in electricity generation and cogeneration is to be abolished, with the excise duty rate set at the same level as for oil products used as fuel.

Because of the new tax rates, the cost of natural gas to households would increase by 2.7 cents per cubic meter per year, the cost of LPG would increase by 5.3 cents per kilo per year, and the cost of diesel used as fuel would increase by 5.8 cents per liter in 2025 and 3.2 cents per liter in 2026.

The rate of excise duty on soft drinks with a sugar content of up to eight grams per 100 milliliters is also set to rise from EUR 7.4 per 100 liters to EUR 11 per 100 liters in 2025. This would increase the tax charged on a liter of soft drink by four cents, the Finance Ministry said.

From 2027, in order to align excise duty rates with the other Baltic countries, excise duty will also be increased for alcoholic beverages, including beer, as well as for tobacco products and products similar in purpose, such as chewing tobacco, tobacco leaves, e-liquids and tobacco substitutes.

The draft law also provides for a limit of 200 liters of fuel in standard tanks for commercial vehicles arriving from third countries. Commercial motor vehicles with more than 200 liters of fuel in standard tanks will be banned from entering Latvia.

The draft law is included in the package of accompanying draft laws on the State Budget for 2025 and the Budgetary Framework for 2025, 2026 and 2027.