5 Energy products taxation
| (a)
(28472)
7512/07 + ADDs 1-2
COM(07) 52
(b)
(28479)
7615/07
COM(07)107
(c)
(28486)
7694/07
COM(07)106
|
Draft Council Directive amending Directive 2003/96/EC as regards the adjustment of special tax arrangements for gas oil used as motor fuel for commercial purposes and the coordination of taxation of unleaded petrol and gas oil used as motor fuel
Commission Communication in accordance with Article 19(1) of Directive 2003/96/EC (operation of private pleasure craft and private pleasure-flying)
Commission Communication in accordance with Article 19(1) of Directive 2003/96/EC (local passenger transport, disabled people)
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| Legal base | (a) Article 93 EC; consultation; unanimity
(b) and (c) —
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| Documents originated | (a) 13 March 2007
(b) and (c) 15 March 2007
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| Deposited in Parliament | (a) 20 March 2007
(b) and (c) 23 March 2007
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| Department | HM Treasury |
| Basis of consideration | (a) EM of 28 March 2007
(b) and (c)EM of 3 April 2007
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| Previous Committee Report | None
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| To be discussed in Council | (a) 5 June 2007
(b) and (c) None planned
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| Committee's assessment | Politically important
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| Committee's decision | (a) Not cleared, further information requested
(b) and (c) Cleared
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Background
5.1 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.
5.2 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 were due to expire on 31 December 2006. 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.
5.3 In October 2006 we reported that the Commission had conducted
a review of the current derogations and had issued a Communication
with its view as to whether they should be allowed to continue
beyond 2006. The Commission noted derogations which after 31 December
2006 would have no legal basis under the Directive and held that
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 asked Member States to assess in the light
of its Communication whether they wished to seek renewal of any
of their derogations. The Commission would assess any such requests
on their merits, taking into account the proper functioning of
the internal market, as well as Community environmental, energy
and transport policies.[10]
5.4 We reported subsequently rejection by the Commission of 16
requests from Member States, including two by the British Government,
for extensions of derogations.[11]
The documents
5.5 The draft Directive at document (a) would amend the Energy
Tax Directive to:
- increase the minimum tax rate for diesel to €359
(£241) per 1000 litres in 2012 and to €380 (£256)
in 2014 as opposed to the current minimum of €302 (£203)
per 1000 litres, which is to rise to €330 (£222) in
2010. The unleaded petrol rate, currently €359 (£241)
per 1000 litres would also rise in line to €380 (£256)
by 2014;
- provide those Member States already benefitting from transitional
periods to meet the current and 2010 minimum rates with an additional
period of two years to meet the 2012 rates and a further two year
period to meet the 2014 rates;
- provide that the non-commercial rate of diesel duty and the
unleaded petrol rate cannot be lower than the commercial diesel
rate;
- allow Member States to lower their commercial diesel rate
to below the national level in force on 1 January 2003, provided
they observe the minimum rates and ensure the overall burden of
taxation remains broadly the same through the introduction of
a road user charging scheme;
- remove the present condition that Member States wishing to
lower their commercial diesel rate to below the national level
in force on 1 January 2003 must also have had a level of national
taxation in force on 1 January 2003 at least double the minimum
rate for diesel set in the Directive; and
- require Member States who apply a lower tax rate for commercial
diesel to implement this by means of a non-discriminatory refund
mechanism, common rules for which would be established by the
Excise Committee, under the regulatory comitology procedure.
5.6 The Commission says that the aim of the proposal is to reduce
distortions of competition in the haulage sector, better protect
the environment and reduce budgetary losses to Member States from
fuel tank tourism (that is where hauliers divert a journey only
in order to seek lower-taxed fuel in another Member State).
5.7 Documents (b) and (c) are Commission Communications announcing
its decisions on a number of requests from Member States for Article
19 extensions of derogations from the Energy Tax Directive. The
first document turns down requests from Finland and Ireland for
renewal of the derogation allowing reduced rate fuel used for
the navigation of private pleasure craft and from Finland, Denmark
and Ireland for renewal of the derogation allowing exempt or reduced
rate fuel used in private-pleasure flying. The second document
refuses requests from Ireland to apply a reduced rate of duty
on road diesel used in road passenger services licensed by the
national licensing authority and to exempt fuel, up to specific
annual limits, used to transport disabled passengers and from
Denmark to exempt liquefied petroleum gas (LPG) and diesel used
in local public transport. (But in relation to the Danish request
the Commission notes that its refusal relates to diesel alone
and that Article 15(1)(i) of the Directive might "privilege"
an LPG exemption.)
The Government's view
5.8 In relation to the amendments proposed to the Energy Tax Directive
in document (a) the Paymaster General (Dawn Primarolo) says that
there is likely to be support from some Member States for the
draft Directive on budgetary grounds but reservations from those
who would need to increase their duty rates. The Minister continues
that:
· for
its part the Government can see merit in the proposal as it will
have a positive impact on the environment by reducing fuel tank
tourism, so lowering fuel consumption and associated emissions.
The Commission estimates that detours in the Community between
now and 2030 would be reduced by 38% if its proposal is adopted
with an associated carbon saving of 0.875 mega tons over the same
period;
· there
would be no effect on UK fuel duty rates, which are already above
the new minima that would be introduced;
· the
Government already benefits from the proposed increased flexibility
for Member States to lower their commercial diesel duty through
the introduction of a road user charging scheme, so this part
of the proposal has no impact on the UK;
· the
Government would like to see more evidence as to why the most
appropriate means of implementing any differential between commercial
and non-commercial diesel rates is through a non-discriminatory
refund mechanism;
· Member
States might want to implement a differential by a different means
and the Directive currently allows such flexibility;
· if
the Commission is able to provide evidence for using a refund
mechanism, the Government does not believe that such a mechanism
necessarily requires a common approach;
· the
Government will not support common implementation provisions for
the refund mechanism through the Excise Committee, which agrees
measures by qualified majority vote. As this runs counter to its
policy of fiscal matters being determined by unanimity the Government
will seek to remove or amend the provision;
· the
Commission estimates that the total budgetary impact from the
proposal, taking into account reductions in fuel tank tourism
would be an additional €48.3 billion (£32.5 billion)
across the Community between 2007 and 2030;
· there
would be no direct financial impact for the UK as the Government's
duty rates are above the proposed minimum rates; and
· it
is unlikely that there will be any material impact on the Government's
tax revenues from reduced fuel tank tourism by hauliers both because
of Great Britain's geographical position and because there is
unlikely to be any significant impact on levels of cross-border
shopping for fuel between Northern Ireland and Ireland as the
latter will only have to raise its duty rate by €12 (£8)
per 1000 litres by 2014.
5.9 In relation to the Commission's decisions in
documents (b) and (c) the Minister comments that expiration of
these derogations has no impact in the UK.
Conclusion
5.10 As far as the UK is concerned the thrust
of the proposal to amend the Energy Tax Directive, document (a),
is unexceptionable except in two regards. But before we consider
the draft Directive further we should like to hear about progress
on those points, that is a possible mechanism for implementing
any differential between commercial and non-commercial diesel
rates and the question of implementation provisions for a refund
mechanism being subject to qualified majority voting.
5.11 Meanwhile the document remains uncleared.
5.12 The Commission Communications in documents
(b) and (c) have marginal interest for the UK and we clear them.
10 (27664) 11167/06: see HC 34-xxxvii (2005-06), para
55 (11 October 2006). Back
11
(28116) 16188/06 (28117) 16190/06 (28145) 16424/06 (28153) 16528/06
(28162) 16757/06 (28163) 16758/06: see HC 41-vi (2006-07), para
2 (17 January 2007) and HC 41-x (2006-07), para 14 (21 February
2007). Back
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