EU Will Propose Harmonised Diesel Fuel Taxes

by Ulrika Lomas, Tax-News.com, Brussels

22 July 2002

Reports from Brussels suggest that the EU Commission is moving towards proposing a a harmonised regime for the taxation of diesel fuel which would involve major losses of tax revenue for some member states which currently have higher rates of tax and excise duty.

It is expected that the EU will announce the plan this week, perhaps setting a level of €350 per 1,000 litres, which would apply after a transition period of up to seven years. The UK, which has the highest in the EU at present with duty of more than €700 per 1,000 litres, raises nearly €19bn of revenue from it; Germany also has a relatively high rate of about €450 per 1,000 litres.

Road transport operators in the UK have been pressing the Government to reduce the tax, which puts them at a disadvantage compared with operators in other countries such as France which have sustantially lower operating costs. The high differential also leads to cross-channel smuggling on a grand scale.

Tax measures in the EU however require the unanimous agreement of all member states - at least until enlargement forces the extension of qualified majority voting to cover some aspects of taxation in the single market - and there is little or no chance of the UK agreeing to such a major loss of revenue.

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