EC To Act On Diesel Excise Duties

by Ulrika Lomas, Tax-News.com, Brussels

15 March 2007

The European Commission on Tuesday unveiled proposals which aim to fight so-called "tank tourism", and to reduce environmental damage.

Currently, existing tax differentials on diesel used by trucks (or commercial gas oil) create distortions of competition within the liberalised Internal Market of the haulage sector.

In addition, according to the EC, they lead to "fuel tourism", whereby truck drivers alter their routes in order to benefit from low tax rates applied in certain Member States, which has a negative impact on the environment.

The Commission’s proposal, therefore, aims at narrowing these differentials, while reducing environmental damages.

"I am firmly convinced that European haulage markets, now fully opened to competition can no longer afford the excessive differentials in excise duties applied to gas oil used by trucks by the Member States. These create significant distortions of competition among companies competing on the same markets and threatens jobs," explained László Kovács, the Commissioner responsible for Taxation and Customs Union.

He continued:

"At the same time, it is important that any proposal concerning road transport contributes to reducing its greenhouse gas emissions, since this sector alone represents 19.3% of the CO2 emissions in EU-25. I am therefore also very satisfied that this proposal would help the environment by reducing notably the unnecessary kilometres driven by truck drivers just to benefit from low taxes on gas oil."

Specifically, the Commission proposes to narrow the tax differentials existing on gas oil used for commercial purposes by the haulage sector by offering more flexibility to Member States to differentiate between commercial and non-commercial gas oil rates.

All Member States will now be able to lower the taxation of commercial diesel below their respective national level of taxation on 1 January 2003, provided the minima are respected and provided the fiscal burden remains the same through the introduction of road charges.

In addition, the proposal will increase in two steps the minimum rate of excise duties from EUR302 to EUR380 per 1000 l in 2014 (with the intermediate step at EUR359), which will reduce the distortions of competition and environmental damages.

Finally, it provides that in any given Member State, the rates for non-commercial diesel and for unleaded petrol cannot be less than that applied to commercial diesel. If these other fuels remain at a lower level than commercial gas oil, they would be treated more favourably than commercial diesel, whereas there is no valid reason (be it environmental or economic) to justify such favourable treatment.

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