Latvia’s government approved a “solidarity payment” for fuel retailers on Tuesday, requiring them to return to the state budget any revenue exceeding a 3% margin above an objectively calculated retail price. The legislation, drafted by the Ministry of Economics (EM), still requires final approval from the Saeima.
The EM’s proposal was initially included on the government’s agenda for its March 31st meeting, following announcements by Prime Minister Evika Siliņa (“Jaunā Vienotība”) after a coalition cooperation meeting. However, the proposal was postponed due to a lack of consensus from the Ministry of Finance, the Ministry of Justice, and the Competition Council. Objections were also raised by the Latvian Fuel Traders Association and AS “Virši-A”.
Following the initial delay, the government approved the legislation on April 14th.
According to the Ministry, the legislation aims to mitigate the negative socio-economic impact of rapidly rising fuel prices and to secure additional financial resources for the state budget to strengthen national supply security and related fiscal needs.
Specifically, if a retailer’s price exceeds the calculated reference price by 3%, the income above that threshold must be returned to the state budget. The reference price is defined as an objectively determined price per liter, reflecting market levels and excluding excessive markups by individual retailers.
The solidarity payment will not apply if a retailer can document that their actual fuel procurement costs exceeded the reference price by more than 3%. In such cases, the base for the solidarity payment will be reduced proportionally to the documented excess procurement cost.
The Ministry emphasized that the solidarity payment is a temporary measure, applicable only when retail prices significantly exceed changes in global oil product prices, providing additional funds to cover associated fiscal needs and lessen the impact of rising fuel costs.
Orientējošo degvielas cenu noteiks katru nedēļu
A government-designated institution will calculate and publish the reference retail price for diesel and gasoline each week on the first working day. The calculation will include all essential cost elements, such as fuel procurement costs, delivery, storage, logistics, and other parameters.
The EM stated that the reference price allows retailers to profit, as the solidarity payment targets only excessive markups. If a retailer’s price exceeds the 3% tolerance, 100% of the income above that threshold will be included in the solidarity payment base.
The regulation stipulates that retailers will make solidarity payments in the amount determined by law, which will be collectively allocated to cover costs and fiscal needs related to the rapid increase in fuel prices. SIA “Publisko aktīvu pārvaldītājs “Possessor”” will administer the solidarity payment, controlling calculations and enforcement, and comparing declared retail prices with published reference prices. “Possessor” will collaborate with the Consumer Rights Protection Centre (PTAC) for inspections.
“Possessor” is authorized to audit calculations and payments, issuing notices for payment and late fees of 0.05% per day, payable within ten days. The PTAC can impose administrative liability for providing false information or failing to make payments.
The law is expected to take effect the day after its official publication.
Norāda uz brīvā tirgus ierobežošanu
Signija Zandere, a representative of the Latvian Employers’ Confederation (LDDK), stated during the government session that the legislation poses risks to free competition, potentially limiting profit-making opportunities. Ieva Ligere, a representative of the Latvian Fuel Traders Association (LDTA), indicated the association does not support the bill, stating they “cannot agree with restrictions on the free market.”
Frequently Asked Questions
What is the purpose of the solidarity payment?
The solidarity payment is intended to mitigate the negative socio-economic impact of rapidly rising fuel prices and to secure additional financial resources for the state budget.
How is the solidarity payment calculated?
If a retailer’s price exceeds the calculated reference price by 3%, the income above that threshold must be returned to the state budget.
Who will administer the solidarity payment?
SIA “Publisko aktīvu pārvaldītājs “Possessor”” will administer the solidarity payment, controlling calculations and enforcement.
As Latvia navigates fluctuating global fuel prices, how might this new legislation impact the relationship between fuel retailers and the government?
