Italian budget proposes CO2 emissions tax

Fuel excise duties to be increased every year for five years to achieve 20m tonnes CO2 cut

Italian fuel excise duties are to be raised every year for the next five years under national budget proposals unveiled by the government on Friday. The move is being presented as a new effort to meet the threat of global warming; the environment ministry says that 20m tonnes of carbon dioxide (CO2) emissions should be saved over the period 1999-2004.

If the new measures drafted by the government win parliamentary approval, Italy will be the first country in southern Europe to introduce CO2 taxation, a subject already on the agenda of several northern states and also of the European Commission.

Petrol, diesel, coal and mineral oils are all included in the Italian package. Excise duties will be raised every year from 1999 to meet a target level in 2004. The government has not indicated what the target level is; it has announced only that annual increases will be between 10% and 30% of the difference between current excise rates and this level.

However, an indication of the scale of the possible tax changes can be gleaned from plans already announced to increase coal excise duties in 1999 by IL1,000 (Ecu0.5) per tonne, and to increase unleaded petrol prices by about 2%. If the petrol price rise were assumed to achieve 20% of the targeted increase, then the government would be looking to achieve around a 10% total increase in unleaded petrol taxation over the five year period.

Fuel producers will have to pay the increased taxes, with consumers due to feel the knock-on effects of higher prices. The budget specifies that responsible organisations will have to make tax payments quarterly, and also specifies fines of up to four times the due amount if the taxes are not paid on time.

The increase in fuel excise duties will raise serious new revenue for the government, according to the business community. Italian financial daily newspaper Sole 24 Ore estimated today that an extra IL3,000bn would be charged in 1999 alone.

According to the government, revenues from the tax will not simply go into the treasury, but will be earmarked to support employment in the south of Italy and to fund environmental improvements in sectors such as transport and space heating in buildings.

Follow Up:
Italian prime minister's office, tel: +39 06 67 791; Italian environment ministry: tel. +39 06 57221.

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