Kovacs Proposes New EU Carbon Tax

by Ulrika Lomas, Tax-News.com, Brussels

08 October 2009

European Commissioner for Taxation Laszlo Kovacs has proposed a new minimum tax on energy consumption in the European Union (EU) to help fight climate change.

The Kovacs proposal is designed to catch carbon emissions which are not currently included in the EU's Emissions Trading Scheme and would apply to energy consumed by households, as well as the agricultural and transportation sectors. Revenues from the tax would be used to fund initiatives to fight climate change, including in developing countries outside of the EU.

Kovacs envisages that the energy tax would operate along similar lines to the EU value-added tax framework, which stipulates the minimum rate that member states may impose the tax.

Kovacs expects that an agreement can be reached by member states in the first half of next year, although he conceded that a consensus on the proposed tax may be difficult to achieve given the economic climate.

“Introducing a new tax in the EU has never been easy, and particularly it’s not easy in the time of a financial and economic crisis,” he said at the recent Informal Council of Economics and Finance Ministers. “But it is evident that the climate change is an even more disastrous global challenge than the current financial and economic crisis."

As with all new tax measures, the so-called 'Laszlo levy' will need to be approved unanimously by member states in order for it to become law.

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