Managing energy consumption: a case of natural gas as a taxation tool in Ukraine

Abstract

Energy consumption is managed to some degree in different countries. If the government is interested in reducing the energy poverty and increasing the energy consumption, it provides enough energy access for all consumers. However, sometimes, in order to regulate the energy market properly, the government should pursue other goals, i.e., political, economic, or even fiscal. This study aims to figure out how the new natural gas policy of Ukrainian government reflects on the main stakeholders’ incomes and expenses: the profits of domestic gas companies; the expenses of the four main groups of households by income. The article shows the case of unfair taxation of households’ natural gas consumption by the Ukrainian government that was named by the authors as “gas tax.” Analyzing this case using the statistical indicators of dynamics, distribution and structure, it was found out that the honest taxpayers who receive middle incomes (middle class) are in the most disadvantaged position because they are forced to pay the highest price and the largest share of their income for utilities. The paper also includes distinguishing several shortcomings and ethical problems that appear during application of the gas tax in Ukraine: growth of cost inflation, reduction in domestic consumption, reducing the profitability of business; reducing the middle class and increasing the stratification of society, concealment of real incomes and growth of the shadow economy, enhancing injustice and labor migration abroad. All these problems are the arguments for reconsidering gas tax to make it fair and less painful for the economy and households.

Keywords

• energy poverty
• households
• middle class
• natural gas
• Ukraine