No decision reached on energy tax

Claire Monkhouse from the IEEP looks at the latest developments at the European Commission

Agreement on the energy tax proposal has been delayed again, despite the conclusions of a European Council meeting in March 2002 that called on finance ministers to reach an agreement by the end of last year.

The proposed directive has two principal objectives: to set a framework for the harmonisation of energy taxation within the EU; and to set minimum rates for the taxation of different energy products.

At the moment, the 1992 Mineral Oils Directive sets minimum rates for motor fuels, but there are no minimum rates for other energy products. The aim of the 1997 proposal was to increase the existing minimum rates for motor fuels, which are so low as to rarely have an impact on policy, and to introduce a minimum tax rate for other energy products from 1998, which would have increased in 2000 and 2002.

Earlier discussions on the proposal, which requires a unanimous agreement in the Council of Ministers, have revealed a range of concerns. The UK did not want the minimum rates applied to domestic energy fuels, while Spain and countries with low duties on motor fuels feared inflationary pressures if minimum fuel duty rates were increased.

In recent years, opposition to the proposal has diminished, as concessions have been made to bring member states on board - domestic energy was exempted, easing UK concerns. According to the Financial Times, member states have now agreed to set the minimum rate for diesel at 2302/1,000 litres, which would rise to 2330 by 2010.

The lower figure was one of the alternatives discussed under the Spanish presidency in June 2002. Although the higher rate is more than the figure proposed by the Commission for 1998, it is still significantly below the rate of 2393 originally proposed for 2002. The next meeting is on 7 March.

Further information:

Proposal for a Council Directive restructuring the Community framework for the taxation of energy products, COM(1997)30, OJ C 139 6.5.1997, available from: cgi/sga_doc?smartapi!celexapi!prod! CELEXnumdoc&lg=EN&numdoc= 51997PC0030&model=guichett



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