3. EXCISE DUTIES ON MINERAL OILS
Draft Council Directive to introduce special tax arrangements for diesel fuel used for commercial purposes and to align excise duties on petrol and diesel fuel.
|Legal base:||Article 93 EC; consultation; unanimity
|Document originated:||24 July 2002
|Deposited in Parliament:
||17 September 2002|
|Department:||HM Customs and Excise
|Basis of consideration:
||EM of 30 September 2002|
|Previous Committee Report:
|To be discussed in Council:
|Committee's assessment:||Politically important
|Committee's decision:||Not cleared; further information requested
3.1 This draft Directive would amend Council Directive
92/81/EEC (harmonisation of the structures of excise duties on
mineral oils) and Directive 92/82/EEC (approximation of the rates
of excise duties on mineral oils). It would introduce a single
harmonised excise duty rate on diesel fuel used for commercial
purposes by 2010, with a transitional period from 2003, and would
align the excise duties on petrol and diesel fuel at national
3.2 Harmonisation would create a single EU-wide rate
of duty on diesel used by commercial users - defined as hauliers
with lorries weighing 16 tonnes or more and coach operators. The
harmonised rate would be indexed in line with inflation. Decoupling
the rate for commercially-used diesel from that for diesel privately
used, would be accompanied by Member States having to tax diesel
for private users at least as highly as that for commercial users,
and being encouraged to approximate the rate for diesel for private
users to the rate for unleaded petrol.
3.3 The current rate of duty on diesel in the UK is more
than one and a half times the central Community rate proposed
to come into force on 1 January 2003. The transitional provisions
in the draft Directive would allow the Government to set a rate
that lay outside the central Community rate, whilst respecting
the Community minimum rate. This derogation would be available
for a maximum of seven years. The Government would also have to
agree a convergence plan to bring the UK excise duty rate within
the band applicable to the other Member States by 31 December
3.4 The Commission adduces competition and environmental
arguments in favour of its draft. It says that, although there
are minimum rates in Directive 92/82/EEC, duties on mineral oils
vary considerably between Member States. This leads to considerable
distortion of competition in the internal market, particularly
in the international transport sector.
3.5 On the environmental issues the Commission says the
principles of sustainable development require that transport users
should pay their external costs. It argues more generally that
the prices for goods, services and activities should cover any
environmental damage they cause. The Commission suggests that
taxation is an effective tool for dealing with diffuse sources
of pollution such as CO2 emissions from motor vehicles.
3.6 The Commission asserts that harmonising upwards duty
rates for commercially-used diesel will address both the competition
and environmental issues. It also asserts that the approximation
of rates for diesel and petrol for private vehicles would allow
Member States to balance more equitably the rates on these fuels
with regard to their environmental costs.
The Government's view
3.7 The Chief Secretary to the Treasury (Mr Paul Boateng)
"The Government accepts the principle of minimum rates
on diesel duty across the EC to protect the environment. However,
the Government sees no reason for a harmonised excise duty rate
and believes that instead Member States should retain flexibility
to apply different duty rates, above the minimum, to diesel used
by lorries and by cars. The Government therefore believes that
this proposal unnecessarily restrains Member States' tax policy
and will make this clear in negotiations."
3.8 The Minister says also "If accepted, these proposals
would more than halve the current rates of diesel duty paid by
commercial users. A provisional estimate suggests that the cost
of such a reduction to the revenue would be approximately £2
billion per annum."
3.9 This draft Directive is important: on the one
hand it seeks to address perceived competition and environmental
problems. On the other it would force on the UK a high degree
of harmonisation and would greatly reduce revenues for the Exchequer.
3.10 This proposal is in the initial stages of negotiation.
We should like the Minister to keep us informed of progress. We
should like also to see a Regulatory Impact Assessment as soon
as the likely final shape of the draft Directive emerges. Meanwhile
we do not clear the document.