Select Committee on European Union Twenty-Fourth Report


21 MAY 2003

By the Select Committee appointed to consider European Union documents and other matters relating to the European Union.



COM (2002) 410  Proposal for a Council Directive amending Directive 92/81/EEC and Directive 92/82/EEC to introduce special tax arrangements for diesel fuel used for commercial purposes and to align the excise duties on petrol and diesel fuel (HM Customs & Excise)

PART 1:executive summary

Taxes on fuel vary significantly across Europe, with the UK charging by far the highest rate of duty. These differences in fuel duty were at the root of the hauliers' protests in this country and elsewhere in 2000. Last year, the Commission proposed a Directive which would reduce or eliminate these tax differentials. The proposal would harmonise tax arrangements for diesel fuel used for commercial purposes and align the excise duties on petrol and non-commercial diesel fuel. The Commission claimed that its proposal would both eliminate distortions to competition and reduce environmental damages.

The proposal is controversial and received a negative reception from the large Member States, who would stand to suffer a large loss of government revenue—the UK Government have estimated that it would cost the Treasury £2 billion per year.

The Committee found that, at present, because of countervailing differences in other taxes and costs, the existing differences in rates of fuel taxation do not serve to distort competition in the haulage market.

The Committee accepts the need for minimum rates of fuel duty in the EU—especially in the context of EU enlargement—as, without a floor, some Member States might set off a 'race to the bottom', which would have a negative impact on government revenues and the environment. The Committee considers that the requirement for reasonable minimum rates has already been met by other legislation (namely, the agreed Energy Tax Directive).

The Committee concludes that the Commission's proposal to harmonise diesel fuel taxation does not contribute to making transport users to face up to the real costs of transport—for the EU as a whole, it would move taxation in the opposite direction because it would reduce the average level of fuel duty and have a negative overall impact on the environment.

The Committee therefore calls on the Commission to withdraw the present proposal.

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