The proposed cuts would mean a decrease of one krona per litre at the pump from January 1st, 2023.
It consists of a further cut to the temporary energy tax cut on petrol and diesel which was already in place, meaning taxes on fuel will go down to 80 öre per litre, as well as a cut on VAT.
The Sweden Democrat economic spokesperson Oscar Sjöstedt said that the package of fuel cuts his party is proposing alongside the government includes three posts.
These are an increase in the travel rebate offered to those driving to work in their own car from 18.50 kronor to 25 kronor per 10km, a decrease of the “reduction obligation”, the rule that fossil fuels must be mixed with more expensive biofuels, to the minimum EU level (resulting in a 4-5 kronor price decrease per litre of fuel), and this 80 öre per litre fuel tax cut.
Despite these measures, this is still a long way off election promises made by the Sweden Democrats, who promised a 10 kronor cut on the price of diesel and a 6.50 kronor cut on the price of petrol.
The Moderates and Christian Democrats – two of the parties in government – also promised to cut fuel prices during the election.
“I would have liked to go a little bit further on this, even though this is the single largest investment we’re making in our budget proposal,” Sjöstedt said.
It’s an expensive post – the proposal being put forward is expected to cost the government 6.7 billion kronor next year.
“At the same time, in a situation where inflation is almost in double digits, it’s dangerous to pursue an expansive fiscal policy. If anything, it should be contractionary,” he said.
He explained that the budget proposal will be neutral, with a slight focus on tighter finances. He did not comment on how the tax cut would be funded.
The budget will be presented on November 8th.
The tax cut is likely to increase Sweden’s carbon dioxide emissions as the price drops and demand increases.
“That could happen,” Sjöstedt said, “But at the same time the situation is unsustainable. We can’t incapacitate our own households and companies.”
“The world doesn’t benefit from us being worse off.”
There will be “quite significant” measures in the other direction, Sjöstedt said, mentioning a measure in the previous right-wing budget about investing in charging posts for electric cars.
Sweden has also been given approval from the EU Commission to introduce a three-month temporary further cut on energy taxes during November, December and January. That opportunity is open to the government, if they choose to take it.
On October 1st, a tax cut equal to a 1.30 kronor cut on at-pump fuel prices also expired.
Sjöstedt said there could be further tax cuts in the future, depending on how high energy prices are.
“Definitely,” he said. “We have checkpoints every year where we see the direction prices on the global market are heading.”
“This is a parameter completely out of our control, which is basically impossible for the government to influence.”
“If diesel prices were at 13 kronor, I wouldn’t start negotiating huge tax cuts because there would be no need,” he added.
The government is aiming to implement the decrease in the reduction obligation – mixing biofuels into petrol and diesel – to the EU’s minimum level in 2024.