Páll Gunnar Pálsson, Director-General of the Competition Authority, said in RÚV television news that the extent of monitoring whether a reduction in fuel prices is passed on to consumers will depend on the response of the oil companies. The occasion is legislation passed by the Althingi on Amendments to the law on value-added tax on fuel which came into effect on 1 May, where the value-added tax on fuel was temporarily reduced from 24 per cent to 11 per cent.
The legal provision obliges oil companies and other fuel retailers to pass on the full reduction to consumers. The Competition Authority monitors the implementation of the provision and can impose administrative fines on companies that breach it. Furthermore, the minister is authorised, following an opinion from the competition authority, to take temporary measures, such as setting a maximum price or a maximum mark-up, or applying other controls on pricing and commercial terms.
The reduction is part of the government's economic measures to respond to rising fuel prices, partly due to the impact of the conflict in the Middle East.
„The supervision depends on the response of the companies. If the companies, as one might expect in a competitive environment, take the opportunity and start competing, gaining market share and so on, then perhaps no questions will be raised and the supervision will be straightforward. However, if the companies drag their feet and we see that prices go back up again soon, then the monitoring could become more extensive,“ said Páll Gunnar.
Páll Gunnar Pálsson then reiterated that it is not desirable to take restrictive action against companies in the market, but that this can prove necessary where there is a lack of competition.
„But I think it is necessary, simply because there is a lack of competition in this market and the competition is not sufficiently robust; all the indications are there. That is why this is necessary,“ said Páll Gunnar Pálsson.
Further information and answers to key questions on the implementation and monitoring of the temporary reduction in VAT Fuel can be seen here.
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