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North Macedonia to roll out ecotax for oil, slash VAT for electricity to 5%

North Macedonia ecotax for oil slash VAT electricity 5

Photo: Wassim Chouak on Unsplash

Published

June 16, 2021

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Published:

June 16, 2021

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Prime Minister Zoran Zaev said an environmental tax of 5.7 cents would be introduced in North Macedonia for oil and that the value-added tax on electricity would temporarily be cut to 5% from 18%.

Consumers in North Macedonia will face higher power bills due to massive investments in the sectors of gas and renewables. Still, Prime Minister Zoran Zaev promised two weeks ago not to raise prices this year. He has just announced that the value-added tax for electricity would be lowered to 5% from 18% for one year. On the other hand, Zaev said the government would impose an ecotax for oil in the equivalent of 5.7 eurocents per liter.

On top of that, Zaev separately revealed an ecological tax should be introduced “in the coming years” on coal and electricity produced from coal.

The oil tax can be a step in pricing fossil fuel emissions

Energy Community Secretariat Director Janez Kopač recently suggested that Western Balkan governments should roll out carbon taxes as an interim measure before the introduction of national emissions trading systems and their integration with the European Union’s ETS.

In his view, such a levy would build on existing “tiny taxes on sulphur dioxide and other emissions” and the EU “could combine pressure and incentives to reduce emissions” in the region.

Revenue from ecotax on oil will offset upcoming rise in power prices

Zaev stressed the new measures would be implemented within the country’s environmental program. He asserted that even with the said ecotax on oil, for which he didn’t disclose a date, North Macedonia would have some of the lowest oil and gasoline prices.

Zaev claims people should travel more with bicycles, scooters and electric vehicles

The levy is projected to bring EUR 27.3 million to the budget over six months, calculated according to public revenue data for last year, the prime minister said. The funds are intended for investments in renewable energy but also to offset the rise in power prices that comes with the liberalization of the electricity market, so that they wouldn’t increase this year, he underscored.

North Macedonia to cushion blow to poor households with social programs

“We will develop all social programs so that in 2022, 2023 and 2024 the poorest citizens will be ready to easily overcome all the energy changes that will come with the transition from coal-fired power plants to green energy such as photovoltaics and windmills,” Zaev explained. In his words, the introduction of the ecotax on oil would be a message to “give up oil and oil derivatives and use them less” and “travel more often with bicycles, scooters and electric vehicles, because the whole world is doing that.”

The prime minister said the VAT on electricity would be cut around July 1 for one year and that it would be boosted to 10% until the beginning of July 2023, when it should be returned to 18%.

The government also earmarked aid for passenger transportation companies of EUR 3,000 to EUR 10,000 per firm.

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