EU Member States Urged Not To Cut Fuel Taxes

by Ulrika Lomas, Tax-News.com, Brussels

24 August 2004

As the price of a barrel of oil approached $50 in New York last week, the European Commission warned member states against making unilateral cuts in fuel taxes and duties to ease the impact of soaring energy costs on consumers and businesses.

"Trying to offset these price rises by excise reductions can cause problems as seen by Ecofin because it doesn't address the source of the problem," Commission spokesman Gilles Gantelet told a daily briefing on Friday.

There are also legal implications involved in cutting petrol taxes, Gantelet explained. As any changes in tax that affect road haulage may affect competition within the EU, they must first be referred to the European Commission.

In June this year, EU finance ministers agreed that individual governments must consult each other before making any changes to fuel levies.

"That commitment by 25 member states to coordinate on economic policy issues… should be honoured of course," Gantalet stated.

However, such an informal political agreement between EU ministers is not enforceable by the European Commission, he pointed out.

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