EU Members Set To Defy Commission Over Fuel Tax Breaks

by Ulrika Lomas, Tax-News.com, Brussels

01 May 2002

The EU Commission has been trying to ban tax breaks given by France, the Netherlands and Italy to road hauliers after fuel-cost protesters brought traffic to a standstill last September; but the Ecofin Council of member states' finance ministers is threatening to derail (de-road?) the action.

According to the Commission, the tax breaks amount to illegal state aids; Competition Commissioner Mario Monti has been highly active in using the EU's executive power to ban governments from giving unfair help to national industries, as for instance over attempts to bail out national airline operators after the September 11th terrorist attacks last year.

The Commission would have banned the tax breaks earlier this year, but held back when it became clear that it was in danger of being over-ruled by its member states. Under a procedure which has previously only been used in the agricultural sector, unanimous opposition from member states can over-ride Commission competence.

It seems that all 15 member states are likely to agree at the next Ecofin meeting, with only Austria so far still todeclare its position. The Commission is predictably aghast: "It's a scandal," said one Commission official. "This is being done under the auspices of the finance ministers, who supposedly stand for financial orthodoxy and fiscal rigour. We never imagined they would use the atomic bomb on this one."

The UK could normally be expected to side with the Commission in a 'state aids' case; but feels sensitive at present about the persistent calls from Brussels for a European tax, and is taking the opportunity to demonstrate its displeasure.

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