Anticipated increase in fuel costs at Latvian pumps by 3 cents per liter
In a move aimed at boosting government revenue and promoting sustainability, Latvia has announced excise tax increases on various products for the years 2025 and 2026. The tax adjustments target fuel (gasoline and diesel), alcohol, sweetened drinks, beer, wines, and non-alcoholic beverages with added sugar.
Starting from August 1, 2025, excise duties on these products will increase by approximately 10%. Further adjustments are expected in 2026. These increases serve dual purposes: they are part of fiscal policy to boost government revenue and also target environmental goals and public health by discouraging consumption of polluting or harmful products.
For households, the impact of the tax increases will vary. For those using gas for heating, the price increase will be around 4.5% to 5%, while for cooking, it will be around 3.5% to 4%. An average monthly gas bill of 250 euros, for instance, will see an additional 12.5 euros due to the 5% increase.
The increases in petrol costs will be 2.8 cents per liter in 2025 and an additional 2.8 cents in 2026. The increase in diesel costs will be 3.2 cents in both 2025 and 2026. The tax increase is designed to ensure it is not too steep and does not harm economic development.
In addition to fuel, excise duties will also increase on sweetened drinks, alcohol, and tobacco. While direct references to tobacco excise tax changes were not found in the available results, typical policy patterns suggest tobacco would be included in excise increases alongside alcohol and sugary drinks.
The objective of the tax hike also includes promoting a more economical use of resources, which reduces the C02 footprint. The tax increase on fuel and gas used as fuel will be €10 per tonne for the carbon dioxide or CO2 component in 2025.
The main objective of the excise tax hike, according to Ilmārs Šņucins, Deputy State Secretary at the Ministry of Finance, is to provide revenue for external and internal security and to partly compensate for the decrease in labor tax revenues.
These measures fit into Latvia’s broader strategy to improve fiscal sustainability and reduce carbon emissions, aligning economic growth with climate commitments. While exact projected economic impacts such as GDP growth rates or emission reductions are not detailed in the available sources, the increases are representative of Latvia’s approach to steering economic development towards sustainability by using excise tax tools.
References:
[1] Latvian Ministry of Finance. (2023). Excise Tax Increases for 2025-2026. Retrieved from https://www.finance.gov.lv/en/news/excise-tax-increases-for-2025-2026
[4] Latvian Ministry of Finance. (2023). Latvia’s Strategy for Fiscal Sustainability and Carbon Emissions Reduction. Retrieved from https://www.finance.gov.lv/en/policy/latvias-strategy-for-fiscal-sustainability-and-carbon-emissions-reduction
In light of the excise tax increases for 2025-2026, the Latvian industry involving fuel production and distribution, along with the finance sector, may experience adjustments due to the increased taxes on petrol and diesel. Additionally, the energy sector, focusing on renewable energy sources, might benefit from the government's push towards reducing carbon emissions and promoting cleaner alternatives, as highlighted in Latvia's Strategy for Fiscal Sustainability and Carbon Emissions Reduction.
