European Commission proposes standardising diesel tax across member states

The European Commission has published a proposal to raise the average diesel tax for lorries and buses across member states in order to help protect the environment. However, the proposed standardised tax would result in lower fuel prices in some of the European Union’s richest states.

Currently, the minimum diesel tax in the European Union is €245 per 1000 litres, but varies considerable, going as high as €750. This means that lorry drivers – whose vehicles have large fuel tanks – can fill up their vehicles in the countries with the lowest prices. For this reason, introducing a minimum tax rate would be less effective than bringing in a rate that is standardised across member states, according to the Commission.

The proposed tax rate is €350 per 1000 litres – just above the current average of €343, to be adjusted for inflation from next year.

“The present huge differences between member states’ excise duty rates on diesel used by the road haulage sector lead to serious distortions of competition in the internal market, particularly since this sector has been fully liberalised since 1998,” said European Commissioner for Taxation Frits Bolkestein. “This proposal would contribute to establishing a suitable overall framework for the taxation of energy products and help to protect the environment by encouraging more efficient fuel use.”

For those countries, such as the UK, that have a higher tax rate than the proposal, there would be no sudden decrease in the nation’s diesel tax rate. Convergence would have to occur by the end of 2009.

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