Spain attacks EU energy tax proposal

Monti plan for minimum duties on energy products claimed to unfairly hit poorer member states

Spain has roundly attacked plans to introduce minimum EU-wide excise duty rates on a range of energy products. The move hints at further problems for the proposal, which still looks far off adoption by the Council of Ministers despite being proposed by the European Commission in early 1997 (ENDS Daily 13 March 1997).

Spain's objections to the plan, often named the Monti proposal after EU tax commissioner Mario Monti, are contained in a paper circulated to EU governments in February. Its existence was revealed to a broader audience in the latest issue of the Brussels-based newspaper European Voice.

According to the Spanish paper, Commission estimates of the expected impacts of the proposal are variously incorrect or underestimate of the "full magnitude of the sacrifice which is being demanded from some member states and especially Spain". Its basic argument is that poorer countries, such as itself, will suffer economically, while richer ones will have to make fewer if any changes.

Under the Monti proposal, an existing EU system of minimum excise duties on mineral oils would be extended to other energy products such as electricity, coal and natural gas. Mineral oil rates would be raised immediately, and all the rates would be increased in three phases until 2002, partly to take account of inflation, but also to lead to a real increase in minimum rates of energy taxation. The proposal envisages that the changes would be revenue neutral overall, "inviting" countries to make simultaneous reductions in employers' social security contributions.

In most northern EU countries, however, existing taxes on energy products are already higher than the new minimum rates envisaged in the draft directive. This being the case, "only some member states, including Spain, will be obliged to raise their tax rates, and only they will suffer a loss of competitiveness both within and outside the EU," the paper says.

According to the paper, unleaded petrol prices would have to rise by over 45% if the proposal were introduced, or by 18% if inflation is taken into account. "The Commission seems to share the view that taxes must rise at all costs," it goes on, "and that it is therefore necessary to put pressure on member states with lower tax rates to force them into a vicious circle of tax and price increases".

Follow Up:
European Voice, tel: +32 2 540 9090; Spanish permanent representation to the EU, tel: +32 2 509 8611.

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