Brussels, 25/06/2012 (Agence Europe) - The EU Council of Ministers is now working under the leadership of the Cypriot Presidency but is examining a watered down version of the draft changes to the fuel and energy tax directive (2003/96/EC) which, along with the financial transaction tax (see EUROPE 10640), were the big tax issues discussed by EU finance ministers at their meeting in Luxembourg on Friday 22 June (see EUROPE 10638).
The ministers agree that the new directive should set minimum tax rates based, as recommended by the Commission in its draft legislation, on calorific content and carbon dioxide emissions. Member states will be allowed great room for manoeuvre, however, in deciding on the details of the tax as long as they levy the minimum laid down in the new directive. A very wide majority of them called for a dropping of proportionality between taxes on different products because this would have required member states to respect the differences between the different minimum tax rates laid down in the directive for each type of fuel and would therefore have led to a significant hike in the price of diesel compared with petrol.
Taxation Commissioner Algirdas Semeta did not hide his disappointment, pointing out that the idea behind the directive had been to ensure equal treatment for different types of fuel so they can compete on their merits rather than on tax subsidies. He said the Commission would now have to slash its ambitions right back. He added that the idea of taxing fuel according to carbon emissions was another key area of the legislation, without which the directive would be deprived of any value-added and therefore some way would have to be found of ensuring this was incorporated in the tax. He said the Commission would be flexible on other aspects of the proposal.
The main objectives to the directive come from the United Kingdom, which does not want changes in the way tax rates are calculated; Poland, where fuel prices would rise sharply under the new system (90% of electricity in Poland comes from coal-fired power station); and Germany, which fears its industry would be penalised by a hike in fuel prices and wants the introduction of a carbon tax to be voluntary. (FG/transl.fl)