FRANCE: Govt proposes commercial energy tax

The French Government has launched a consultation paper detailing proposals to start collecting a new tax on non-domestic and non-transport energy consumption in 2001.

The new energy tax would be an extension of the Tax on Polluting Activities – approved earlier this year and due to come into force in 2000. In order to safeguard industrial competitiveness and promote employment, the energy tax would be entirely offset by a corresponding reduction in employers’ contributions.

According to the French Environment Ministry, this unprecedented step of consulting on tax policy demonstrates the Government’s commitment “to find the best possible solutions reconcile the objectives of environmental policy with the need to preserve industrial competitiveness.”

The Ministry says that although the transport sector uses more energy than industry, competitive pressures mean that taxation in this area should be worked out on an EU level. Domestic energy use is already taxed at up to 12%, with heating oil taxed at one of the highest rates in Europe. Hence the decision not to increase the tax burden on domestic usages.

However, France currently tends to tax commercial energy use less than other countries. Unlike many European countries (notably Italy, Denmark, Austria, Finland, Spain, Holland, and Germany), local energy taxes do not apply to industrial uses of electricity. Overall, industrial use of natural gas is taxed at 40% less than the EU average, likewise, industrial heating oil is taxed at less than the EU average, and industrial coal use is not taxed at all.

The Ministry says it is hoping for the rapid adoption of a European directive on harmonised energy taxation, and cites a number of initiatives taken by other European countries, in anticipation of such a directive:





Type of energy

Electicity, gas, fuels, heating oils (not covering coal).

Electricity, coal, gas (not covering fuels and heating oils) used by companies.

Fuels, gas, coal and heating oils.

Year of implementation

1999 for phase one. Two phases to follow.


From 1999 to 2005.

Main rates or increases applicable

Electricity .7p/kWh,

fuels 2p/lit., gas .11p/kWh, heating oil 1.36p/kWh

Electricity .6p/kWh, gas and coal .2p/kWh

Gas de 88.5p à £6.78/m3 according to usage, coal £14.10/tonne, fuels from 1.3p to 5.3p/litre according to type

heating oils from .4p to 25p/kg according to use and type.

Expected revenue

> FF30 billion (£2.98 billion) in first phase.

> FF15 billion (£1.49 billion)

FF8.5 billion (£845 million) in 1999 and FF40 billion (£3.98 billion) by teh end of the reform.

Allocation of revenue

Reduction of employers’ contributions.

Reduction of employers’ contributions and renewable energy assistance.

Reduction of employers’ contributions.

Source: French Environment Ministry

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