EC Comments On Energy Tax Measures In Several Member States

by Ulrika Lomas, for LawAndTax-News.com, Brussels

13 February 2007

The European Commission announced last week that Germany's exemptions from energy taxation for dual use of energy products (such as in steel production, where the energy product is also used as a raw material) and for use of energy products in processing minerals (such as cement and glass production) do not constitute aid under EC Treaty state aid rules, since they are a consistent part of the overall national tax system.

However, the Commission has decided that tax exemptions from heavy fuel duty granted by France, Ireland and Italy for alumina production do constitute state aid because in all three Member States, these exemptions are highly selective and in practice benefit only one company per country and one sector (alumina production).

The Commission concluded that 80% of the value of the tax exemptions for the period from 1 January 2004 is compatible with the state aid rules.

However, since the beneficiaries have not engaged in binding agreements to improve their environmental record, the Commission has - in accordance with the guidelines on state aid for environmental protection - found the remaining 20% to be illegal state aid, and ordered France, Ireland and Italy to recover this money from the beneficiary companies Alcan, Aughinish and Eurallumina.

Previously, in December 2005, the Commission had ordered the recovery of part of the tax exemptions for alumina production in France, Ireland and Italy for the period 2002-2003.

The three countries must now suspend the payment of the compatible aid to beneficiaries until they have paid back the aid found incompatible in the present and previous decisions.

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