The Chancellor of Justice: Tax and Customs Board’s practice combating illegal trafficking of fuel at the frontier crossing points and excise tax law need to be changed

The Chancellor of Justice Indrek Teder is convinced that the Tax and Customs Board’s practice in taxing importation of fuel in a standard fuel tank of a motor vehicle at the frontier crossing points of the Estonian-Russian border is not in conformity with the principles of legality and good administrative practice.

The Chancellor of Justice submitted a recommendation to the minister of finance and Tax and Customs Board to improve the situation at the border. He suggested to the minister to initiate an amendment of the Alcohol, Tobacco, Fuel and Electricity Excise Duty Act to invalidate confusing destination criteria[1] used as bases for the taxation and to establish new measures combating illegal trafficking of fuel at the border considering the requirements enacted in the EU law and the Constitution of the Republic of Estonia. In addition, the Chancellor suggested the Tax and Customs Board as far as recommended amendments of the excise law are not entered into force, to abandon the implementations of the destination criteria as bases for the taxation and take into account the provision of the EU law according to which a person may import tax-free fuel in a standard fuel tank of a motor vehicle from time to time for its own needs.

Confusions at the Estonian-Russian border began in June 2012 when the Tax and Customs Board radically changed its practice in taxing the fuel imported in a standard fuel tank of a motor vehicle. Until then, the Board did not make any obstacles to import the fuel even if the importation was carried out by the same person several times per day. Since June, however, the Board started to insist that also persons who visited Russia up to 2 times per month without a clear destination point in Russia, would pay excise tax, VAT and custom tax from the fuel that would not be necessary to reach the destination point of the vehicle in Estonia.

The Chancellor of Justice emphasised the importance of combating against the illegal trafficking of fuel at the borders, but also drew minister’s and Tax and Customs Board’s attention to the fact that the actions achieving the noble goal cannot violate people’s rights and freedoms. The Chancellor explained that the new administrative practice of the Board does not consider the fact that people who import the fuel for their own needs few times per month have a right to tax exemption according to the EU directives and regulations. He also deplored the calculation of taxes based on the destination criteria in which case a person has to pay taxes on fuel that would not be necessary to reach the destination point of the vehicle in Estonia. As estimated amount of tax depends on the final destination, the officials of the Tax and Customs Board had even prescribed for a person through which frontier crossing point he or she has to leave Estonia if the alleged final destination point is not in Estonia. In Chancellor’s opinion no tax and custom official has a right to prescribe such thing and this kind of practice is contrary to the constitutional principles of freedom of movement and action.



[1]According to the Alcohol, Tobacco, Fuel and Electricity Excise Duty Act § 68 (1) fuel which is contained in the standard fuel tank of a motor vehicle or the standard fuel tank of a special container, including the standard service tank of a motorised water craft, and which is consumed in that vehicle or craft and is necessary to reach the destination of the vehicle or craft is exempt from excise duty upon entry into Estonia.