France announces new round of fuel tax cuts

2001 budget proposal includes further fuel duty reduction, earlier introduction

France yesterday cemented its position as Europe's least steadfast supporter of high fuel taxes, offering a further significant fuel tax cut to all road users to ease the pressure of high oil prices. In his 2001 budget proposal, finance minister Laurent Fabius announced a 7% reduction in petrol and diesel fuel duty - two percentage points more than the government promised at the end of August. He also said that the cut would take effect on 1 October rather than 21 January next year.

For domestic heating oil and "gas oil", fuel for farm machinery, the cut took effect today. The reduction is in addition to a separate 30% cut in duty for these announced at the end of August.

The move on fuel duty has been denounced as inadequate by centre-right opposition parties and the national motorists association, but supported by Green environment minister Dominique Voynet. Ms Voynet's support hinges on the temporary nature of the fuel tax reduction. Under a new "floating" system of fuel taxation, fuel duty should rise when crude oil prices are low and drop when they rise. Adjustments will be possible every two months.

The cut in duty follows several other concessions to fuel tax protesters announced at the end of August (ENDS Daily 6 September). They include a one-year freeze in the seven-year diesel tax escalator, with a two-year freeze for road hauliers, plus abolition of annual road tax for private motorists from 1 November.

The government expects to make up some of the fuel tax revenue it is losing by subjecting oil firms to a one-off supplementary charge. Announced by Mr Fabius in August, the plan was confirmed yesterday but has yet to be formally presented. The scale of the charge has not been decided, but the finance ministry has said that a 20% exceptional charge on company profits arising from higher crude oil prices is possible.

In terms of public spending, the 2001 budget proposal is a good one for the environment ministry, which will be given one of the largest gross budgetary rises, at 9.2% (ENDS Daily 17 September 1999).

Follow Up:
French finance ministry, tel: +33 1 40 04 04 04; Mr Fabius' budget speech; August tax announcement.

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