Select Committee on Northern Ireland Affairs Appendices to the Minutes of Evidence


Further memorandum submitted by HM Customs and Excise

  This paper by HM Customs and Excise has been prepared in response to the letter of 29 January from the Clerk of the Northern Ireland Affairs committee in connection with the Committee's examination of the sale of fuel oils in Northern Ireland. The paper follows the order in which the Clerk of the Committee has asked for the information.

SECTION 1

  A list of the national borders within the EU across which there are material differences of road fuel duty or road fuel retail prices, giving the differences in each case and details of any specified duty relief or rebate schemes operated in the frontier areas and designed to reduce locally the impact of the cross-border differential in retail prices.

  The Clerk of the Committee also asks for information about external frontiers, which is taken to mean non-member states. This information cannot be made available within the deadline for reply but, in any case, does not seem relevant because of the reasons given in section 2. But we are not aware of any Member State that offers any reliefs or rebates in the frontier areas with non-member states (but see Italian scheme for Trieste).

SECTION 2

  Details of any restrictions in EU law which have the effect of preventing the Government, if it wished to do so, setting differential duty rates for particular areas of the UK.

SECTION 3

  An estimate, for each of the last five years, of road fuel duty collected in respect of consumption in Northern Ireland, broken down by type of fuel.

  The Committee should note that Customs and Excise does not have information in this form but has provided information from the DTI publication, Digest of United Kingdom Energy Statistics, 1998.

  Finally, the Committee asks which Minister currently handles Cusoms and Excise matters. The Paymaster General, Dawn Primarolo MP, is the Minister responsible for Customs and Excise and with overall responsibility for tax and the Finance Bill. However, the Economic Secretary, Patricia Hewitt MP, is the Minister responsible for taxation of company cars and road fuel.

 SECTION 11.1  NATIONAL BORDERS—DUTY DIFFERENTIALS

  (Source: Excise Duty Rate Tables produced by the European Commission, Directorate General XXI).


A B Duty differentials

Member State
EU land boundary
Petrol (ECU per
1,000 litres)
Diesel (ECU per
1,000 litres)
AustriaGermany +92.99+34.2
Italy+124.78 +106.55
BelgiumGermany
France+91.01 +76.19
Netherlands+65.06 +31.47
Luxembourg-145.42 -36.97
GermanyFrance +83.3+49.22
Denmark-55.97 (n.e. 10%)
Luxembourg-153.13 -63.94
Austria-92.99 -34.2
Netherlands+57.35 (n.e. 10%)
Belgium
DenmarkGermany +55.97(n.e. 10%)
Greece
SpainPortugal +106.6(n.e. 10%)
France+216 +99.02
FinlandSweden
FranceBelgium -91.01-76.19
Germany-83.3 -49.22
Spain-216 -99.02
Italy
Luxembourg-236.43 -113.16
United KingdomRepublic of
Ireland

-253.83

-318.51
IrelandUnited Kingdom +253.83+318.51
ItalyFrance
Austria-124.78 -106.55
LuxembourgBelgium +145.42+36.97
France+236.43 +113.16
Germany+153.13 +63.94
NetherlandsBelgium -65.06-31.47
Germany-57.35 (n.e. 10%)
PortugalSpain -106.6(n.e. 10%)
SwedenFinland


  Notes: The Member States in bold in Column B have a duty differential of 10 per cent on at least one mineral oil product compared to Column A. 10 per cent is assumed to represent a material difference for the purposes of this paper.

  A plus figure means that the duty rate for the country in column B is greater than that for the country in column A.

  A minus figure means that the duty rate for the country in column B is less than that for the country in column A.

1.2  EUROPEAN ROAD FUEL PRICES

  Source: Department of Trade and Industry, Energy Policy and Analysis Unit.


Current prices
Price differential

Member StateUnleaded DieselEU land boundary: UnleadedDiesel

Austria54.7242.23 Germany+0.64-3.15
Italy +7.12+6.19
Belgium58.8540.30 Germany-3.49-1.22
France +3.86+3.08
Netherlands +7.64+4.77
Luxembourg -16.42-5.90
Germany55.3639.08 France+7.35+4.30
Denmark +5.87+3.32
Luxembourg -12.93-4.68
Austria -0.64+3.15
Netherlands +11.13+5.99
Belgium +3.49+1.22
Denmark61.2342.40 Germany-5.87-3.32
Greece41.9533.65
Spain45.1436.66 Portugal+11.43+1.99
France +17.57+6.72
Finland61.5544.31 Sweden-1.55+2.45
France62.7143.38 Belgium-3.86-3.08
Germany -7.35-4.30
Spain -17.57-6.72
Italy -0.87+5.04
Luxembourg -20.28-8.98
United Kingdom63.0664.24 Republic of Ireland-12.35 -16.57
Ireland50.7147.67 United Kingdom+12.35 +16.57
Italy61.8448.42 France+0.87-5.04
Austria -7.12-6.19
Luxembourg42.4334.40 Belgium+16.42+5.90
France +20.28+8.98
Germany +12.93+4.68
Netherlands66.4945.07 Belgium-7.64-4.77
Germany -11.13-5.99
Portugal56.5738.65 Spain-11.43-1.99
Sweden60.0046.76 Finland+1.55-2.45


  1.3  The Committee has asked for details of any specified duty relief or rebate schemes operated in the frontier areas designed to reduce locally the impact of the cross-border differential in retail prices. Schemes in the Netherlands and France are cited as possible examples.

THE DUTCH SCHEME

  1.4  This grants a subsidy to filling stations within 20 kilometres of the German border. It covers light oil, which we take to mean petrol only (borne out by table showing differentials), and is paid at a rate of:

    —  100 guilders per 1,000 litres (at an illustrative exchange rate of 3.2 guilders to the £, this is about 3.1 pence per litre) of fuel delivered into vehicle fuel tanks when within 10 kilometres of the border; and

    —  50 guilders per 1,000 litres (about 1.5 pence per litre) when between 10 and 20 kilometres.

  1.5  The above is subject to a maximum subsidy in guilders equivalent to 100,000 ECU per applicant. The scheme also provides for reductions in the subsidy if German duty rates increase.

  1.6  The differential between Dutch (555.80 ECU) and German (498.45 ECU) unleaded petrol rates is currently 57 ECU. It should also be noted that VAT in the Netherlands is 17.5 per cent while it is 16 per cent in Germany.

  1.7  There is some question about whether regional relief of this sort is a state aid. That is certainly the Commission view and they are currently exploring with the Netherlands whether or not their scheme offends the state aid principles.

  1.8  There is a de minimis amount that would not constitute state aid. It is 100,000 ECU over a three year period. But it is per business, not per filling station. A Commission notice on the de minimis rule, from the Official Journal of the EC, is attached[1].

  1.9  The Dutch scheme is not a differential duty rate for regional reasons.

THE FRENCH SCHEME

  1.10  The partial fuel duty rebate in France has no regional connotation. France has requested a derogation for a reduced rate of excise duty on diesel used by commercial vehicles of 12 tonnes or over, up to an annual consumption of 40,000 litres per vehicle. This is within the context of the French attempting to increase diesel duty by more than petrol, ie, they want to do so, but to spare hauliers the brunt of the impact. The Italians may ask for a similar derogation. However, the benefit of these derogations could not be restricted to French or Italian hauliers: they would have to be available to hauliers from other Member States while operating in France. This would not offend any state aid principle because it is not of regional benefit.

OTHERS

  1.11  Article 8(4) of Council Directive 92/81 permits the Council to authorise Member States to introduce exemptions or reductions for specific policy considerations. Council Decision 97/425 authorises Member States to continue to apply existing reduced rates of excise duty for mineral oil when used for specific purposes. This effectively continues some of the derogations that Member States negotiated on adoption of Directive 92/81: these derogations are automatically extended for periods of two years unless the Commission proposes abolition or modification.

  1.12  The only derogation of a regional nature authorised under paragraph 1.11 is in Italy for consumption in the regions of Val d'Aosta and Gorizia.

  1.13  The continuation of certain other exemptions and reductions in rates of excise duty has also been authorised under Council Decision 97/425. These applied until 31 December 1998 and were subject to review by the Commission at that time. However the review was not completed and the period has been extended to 31 December 1999. The purpose of the review was to ensure that the derogations are compatible with other Treaty provisions. Those of a regional nature are:

    —  in France for consumption on the island of Corsica provided that the reduced rates at all times respect the minimum rates of duty on mineral oils as provided for under Community law;

    —  in Italy for a reduction in excise duty on petrol consumed on the territory of Friuli-Venezia Giulia, provided that the rate of duty respects the minimum rate provided for under Community law;

    —  in Italy for a reduction in the rate of duty for mineral oils consumed in the regions of Udine and Trieste, provided that the rates of duty respect the minimum rates provided for under Community law.

  1.14  Council Directive 92/82 provides for the approximation of the rates of excise duties on mineral oils. This Directive has Articles that relate to rates of duty for certain regions in Portugal and Greece; these are all islands. They are:

    —  Article 9.1. The Portguese Republic may apply rates of excise duty on mineral oils consumed in the Autonomous Region of the Azores lower than the minimum rate laid down in this Directive in order to compensate for the transport costs incurred as a result of the insular and dispersed nature of this region;

    —  Article 9.2.  The Hellenic Republic may apply rates of excise duty up to ECU 22 lower than the minimum rates laid down in this Directive on gas oil used as a propellant and on petrol consumed in the departments of Lesbos, Chios, Samos, the Dodecanese and the Cyclades and on the following islands in the Aegean: Thasos, North Sporades, Samothrace and Skiros.

SECTION 2

  2.1  The Committee goes on to ask for details of any restrictions in EU law which have the effect of preventing the Government, if it so wished, setting differential duty rates for particular areas of the UK.

  2.2  The UK would have to apply for a derogation under Article 8(4) of Directive 92/81. No derogations have been granted to permit reduced rates to be applied in particular regions other than those agreed during the course of negotiations of the Directive itself.

 SECTION 3

  3.1  The Committee also asks for an estimate, for each of the last five years, of road fuel duty collected in respect of consumption in Northern Ireland, broken down by type of fuel. The following table has been compiled from the Digest of United Kingdom Energy Statistics, 1998 (Table No 4.11). These figures have been used, as previously explained to the Committee, because Customs and Excise collects duty at an early point in the distribution chain, delivery from refinery or import warehouse. Much of the road fuel distributed in Northern Ireland arrives there duty paid and so is not subject to any Customs controls.

THOUSAND TONNES

19941995 19961997 1998

Petrol555523 508466*314
Diesel377350 374338*203


  *  These figures are for the first nine months of 1998: the fourth quarter figures were not available at the time of writing.

18 February 1999


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