Lords Report Rejects EU Fuel Duty Harmonisation

by Robert Lee, Tax-News.com, London

23 May 2003

An EU proposal to harmonise the duty on fuel by 2010 will halve the price of commercial diesel in the UK and deprive the Treasury of £2 billion in revenue, a Houe of Lords report has revealed.

The European plan is designed to encourage a level playing field across the union by ending the disparity between fuel duty in member states, in addition to claiming the measure will increase the amount of tax revenue national governments will receive. However, Lord Geddes who led the inquiry says that the UK Treasury will actually lose out to the tune of £2 billion and called the commission's arguments on fuel tax "confused".

"The commission is wrong to say its proposal would generate extra revenue for governments," said the peer, adding: "While cuts in tax on diesel might delight lorry drivers, the potential economic and environmental consequences of this proposal make it unacceptable."

"The proposal goes against the EU's 'polluter pays' principle," observed Geddes in a BBC report, "and does nothing to make transport users face up to the real costs of transport - for the EU as a whole it would move taxation in the opposite direction because it would reduce the average level of fuel duty."

Lord Geddes rejected the EU's argument that the harmonisation of fuel duty would bring about greater competition as the disparities in fuel duty are often offset in other areas of taxation.

"Because of compensating differences in other taxes and costs, the existing differences in rates of fuel taxation do not distort competition in the haulage market," Geddes concluded.

Recommended