55 Energy taxes
|Commission Communication: Review of the derogations in Annexes II and III of Council Directive 2003/96/EC that expire by the end of 2006
|30 June 2006
|Deposited in Parliament
|6 July 2006
|Basis of consideration
|EM of 18 July 2006
|Previous Committee Report
|To be discussed in Council
55.1 The Energy Tax Directive, 2003/96/EC, sets out which energy
products are concerned, the uses that make those products liable
to tax, the minimum rates of taxation applicable to each product,
depending on its use as a propellant, for industrial and commercial
purposes or for heating and specific exemptions from the normal
rules. The Directive also sets out in annexes a number of derogations
which allow Member States to apply reduced rates or exemptions
from energy tax for various products and purposes. Most of these
derogations are due to expire on 31 December 2006.
55.2 Under Article 19 of the Directive a Member State
may ask the Commission to propose to the Council a new or extended
derogation. If the Commission makes such a proposal it is decided
by the Council unanimously.
55.3 As required by the Directive the Commission
has conducted a review of the current derogations and sets out
in this Communication its view on whether or not these derogations
should be allowed to continue beyond 2006. It considers derogations
in four categories:
- derogations relating to
situations outside the scope of the Directive.
Five current derogations involve the non-fuel use of energy products
and the Commission suggests that, since such use is outside the
scope of the Directive, there is no need for these derogations
to be considered;
- derogations which have become obsolete.
The Commission says that at least eight derogations were no longer
being applied and therefore could be allowed to expire;
- current derogations the objectives of which
are taken into account through the flexibility offered by the
general provisions of the Directive. The
Commission says many of these derogations are no longer needed
because they allow Member States to apply a specific tax treatment
that is covered by the provisions of the Directive, but some Member
States may have to make some adjustments to their tax treatment
in order to ensure that it is totally in line with the Directive.
The Government's duty incentive for biodiesel and bioethanol falls
into this category, but would not require adjustment; and
- derogations concerned with objectives not
taken into account by the general provisions of the Directive.
The Commission reports 35 derogations
which, following expiry of the derogations at the end of 2006,
would have no legal basis under the Directive. These derogations
- fuel used by private pleasure air navigation;
- fuel used for navigation in private pleasure
- waste oil reused as fuel;
- specific policy purposes in certain geographical
- miscellaneous purposes.
The Government holds derogations in the first three
of these sub-categories.
55.4 The Commission's view is that the expiry of
most of the derogations should be seen as an opportunity to achieve
greater transparency and greater coherence in the energy tax legislation.
It asks Member States to assess in the light of the Communication
whether they wish to continue to seek renewal of any of their
derogations. The Commission would assess any such requests on
their own merits, taking into account the proper functioning of
the internal market, as well as Community environmental, energy
and transport policies.
The Government's view
55.5 The Paymaster General (Dawn Primarolo) says
that the following derogations need to be renewed if the current
Government duty treatment is to continue:
- fuel used in navigation in
private pleasure craft (shared by four Member States, including
Ireland and Finland);
- fuel used in private pleasure air navigation
(shared by seven Member States, including France and Italy); and
- waste oils reused as fuel (shared by ten Member
States, including France and Spain).
She says that the Government confirmed in the 2006
Budget that it would apply for renewal of all three derogations.
The Minister adds that the Government believes there is a credible
case for renewal of these derogations and will shortly make formal
applications for their renewal.
55.6 In clearing this document we draw it to the
attention of the House, since renewal of the relevant derogations
is fundamental to the Government's current duty regime for fuel
used for private pleasure craft and aircraft and for waste oil
reused as fuel.