What is the effect of EU's fuel-tax cuts on Russia's oil income?

Johan Gars, Daniel Spiro and Henrik Wachtmeister

Papers from arXiv.org

Abstract: Following the oil-price surge in the wake of Russia's invasion of Ukraine, many countries in the EU are cutting taxes on petrol and diesel. Using standard theory and empirical estimates, we assess how such tax cuts influence the oil income in Russia. We find that a tax cut of 20 euro cents per liter increase Russia's oil profits by around 11 million Euros per day in the short run and long run. This is equivalent to 4100 million Euros in a year, 0.3% of Russia's GDP or 7% of its military spending. We show that a cash transfer to EU citizens, with an equivalent fiscal burden as the tax cut, reduces these side effects to a fraction.

Date: 2022-04, Revised 2022-05
New Economics Papers: this item is included in nep-cis, nep-ene, nep-mac, nep-pbe, nep-pub and nep-tra
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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:2204.03318

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