5 Energy products taxation
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7512/07 + ADDs 1-2
COM(07) 52
| 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
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| Legal base | Article 93 EC; consultation; unanimity
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| Department | HM Treasury |
| Basis of consideration | Minister's letter of 1 June 2007
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| Previous Committee Report | HC 41-xviii (2006-07), para 5 (25 April 2007)
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| To be discussed in Council | Not known
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| Committee's assessment | Politically important
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| Committee's decision | Not cleared, further information awaited
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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 This draft Directive 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 benefiting 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.
5.3 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).
5.4 When we considered this document in April 2007 we noted that
as far as the UK is concerned the thrust of the proposal is unexceptionable
except in two regards — a possible refund mechanism for
implementing any differential between commercial and non-commercial
diesel rates and the question of implementation provisions for
such a refund mechanism being subject to qualified majority voting.
We said that before we consider the draft Directive further we
wanted to hear about progress on those points, meanwhile the document
remained uncleared.[11]
The Minister's letter
5.5 The Financial Secretary to the Treasury (John Healey) tells
us that the proposal has now been discussed in a Council working
group. He says that:
- there has been little real progress so far on a mechanism
for implementing any differential between non-commercial and commercial
diesel duty;
- the Commission has still not provided any detailed evidence
to support making a refund mechanism compulsory;
- there has been slightly more about why the Commission favours
this approach — it has argued that a refund mechanism is
the only way that such a differential could be applied so as to
be non-discriminatory and says this is the option strongly favoured
by the oil industry, as it does not want to face a double streaming
option (where there are two different pump prices);
- the Government does not consider the Commission's arguments
in favour of a harmonised approach are convincing — it is
not clear why another means of implementing such a differential
could not also be non-discriminatory, for example an option which
involved two pump prices;
- the Government thinks that it is for Member States to consider,
in the context of any decision to lower its rate of commercial
diesel duty, how best to implement this, having taken into account
all relevant factors, including the burdens on oil companies and
hauliers, the administrative costs, and the risk of fraud of any
particular scheme; and
- following such an assessment, the most appropriate means of
implementing a differential may well prove to be different in
different Member States, suggesting that they should retain flexibility
in this regard.
5.6 Turning to the question of implementation provisions for such
a refund mechanism being subject to qualified majority voting
the Minister reiterates that the Government could not support
such an approach as it runs counter to its established policy
of fiscal matters being determined by unanimity.
Conclusion
5.7 We are grateful to the Minister for this report. However
it is clear that the question of a compulsory refund mechanism
is far from settled and we will continue to hold the document
under scrutiny until the Minister is able to give us an account
of a more definite text on this issue for our consideration.
5.8 As for the Minister's comment about any implementing provisions
and qualified majority voting we take this to mean the Government
would veto any text that allowed this. We are content with such
a position.
11 See headnote. Back
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