EU seeks higher tax on diesel fuel

"European haulage markets, now fully opened to competition, can no longer afford the excessive differentials in excise duties applied to gas oil used by trucks. These create significant distortions of competition among companies competing on the same markets and threaten jobs," said EU Tax Commissioner Laszlo Kovacs, adding: "At the same time, it is important that any proposal concerning road transport contributes to reducing its greenhouse-gas emissions, since this sector alone represents 19.3% of the CO2 emissions in EU-25." 

However, a number of his fellow Commissioners, including Charlie McCreevy (internal market) and Dalia Grybauskaite (budget), had earlier opposed the move, claiming that it was anti-competitive. "To keep Europe's economy competitive, we need to decrease minimum taxes for all fuel but not increase them," Grybauskaite said, adding: "Increasing excise duties would play the role of catalyst for fuel prices. Keeping in mind a recent tendency of fuel prices, it's surely not our goal of today." 

The International Road Transport Union (IRU), which represents coach and truck operators, said that the proposal lacked political courage and would most likely fall short of its objectives due to its failure to harmonise commercial fuel taxes or to even set a maximum limit. 

"Subsequently, high-taxing member states will simply have a good incentive to increase fuel-duty rates as lower-taxing countries reach their existing levels. This will have the effect of penalising the European road transport industry, which has become a vital production tool, hence making Europe less competitive in today’s globalised economy," it said in a statement, adding that the environmental benefits "if any, will be negligible". 

The International Automobile Federation (FIA) has also criticised the plan, saying that the private car consumer will suffer from it. "Any moves that lead to a tax differentiation between commercial and private vehicle use would lead to a further increase of the cost of motoring, increase administrative bureaucracy and is not in line with current environmental policy goals," states the organisation, adding: "FIA is astonished by the lack of consistency in the Commission’s policy. While Commissioner Dimas has been pushing for lower levels of CO2 emissions, Commissioner Kovács is, through his taxation policy, forcing the private user to reconsider diesel despite the fact that diesel produces 15% less CO2 compared to petrol." 

On the other hand, green NGO T&E (European Federation for Transport and Environment) welcomed the proposal. Nina Renshaw told EurActiv that raising fuel tax levels was "definitely a step in the right direction", adding that it would encourage freight transporters to increase efficiencies, thereby leading to CO2 reductions. She cited the example of Germany, where emissions of CO2 have gone down by 3% following a 36% fuel-price increase. 

Nevertheless, T&E regrets the fact that diesel would not, in the first instance, be taxed at higher rate than petrol. "A litre of diesel burned releases 12% more CO2 into the atmosphere than a litre of petrol, so the minimum tax should also be 12% higher than that on petrol," said Renshaw. 

The remarks of UK Conservative Leader in the European Parliament Timothy Kirkhope reveal that even high-tax countries could oppose the EU attempt to fiddle with their taxes: "Although our diesel duty is one of the highest in the EU, we must oppose tax harmonisation in principle. After all, whatever happened to subsidiarity?"