Sarkozy Calls For EU Cap On Fuel Taxes

by Ulrika Lomas, Tax-News.com, Brussels

28 May 2008

French President Nicolas Sarkozy has urged the European Union to put in place a cap on fuel taxes to mitigate the damaging impact of rising oil prices on industries heavily dependent on petrol and diesel.

As he attempted to soothe the French populace's concerns over the economy, in particular rising inflation caused by rocketing oil prices, Sarkozy told French radio station RTL on Tuesday that sales taxes on oil products should not continue to rise and exacerbate the problem.

"If the price of a barrel of oil continues to rise, are we going to allow VAT to keep rising proportionately? My proposal is that we should stabilise it," he commented, adding that he would be putting the proposal forward within the EU.

However, it seems that Sarkozy's suggestion is being greeted with little enthusiasm in the European Commission, which has reportedly argued that such an idea would "send a bad signal" to oil producing countries because it would give them little incentive to cool prices.

Sarkozy's concern over rising oil prices is shared by many other EU member states, but any changes to tax legislation must have the unanimous consent of all member states, something that is unlikely to be immediately forthcoming.

The French President's proposal has however, been given fresh impetus as the price of a barrel of crude oil creeps back towards the record $135.09 seen on 22nd May.

Recommended