EU energy tax talks to be revived

Proposed exemptions seen as key for agreement next year on tax harmonisation framework

EU finance ministers are to restart controversial talks aimed at harmonising some European energy taxes, following a meeting held in Brussels this week. The European Commission's plan for minimum excise duties rates on fossil fuel and other energy sources now has arguably its best chance of making progress since it was proposed last year (ENDS Daily 13 March 1997).

Though most EU countries support EU tax commissioner Mario Monti's idea of setting a common floor for fuel excise duties, the Austrian presidency has struggled to take talks forward. The incoming red/green German government is seen as an important new ally for the plan, since it has pledged to raise domestic energy taxes and is expected to make energy taxation a top priority for Germany's EU presidency, which starts in January.

Nevertheless, the prospects for agreement remain hostage to an EU rule that any agreement on tax measures must be reached by unanimity, plus strong opposition to the plan from some countries - Spain and Greece in particular. Spain argues that it would boost inflation, while Greece says that its industries would face unacceptably high costs. Ireland, France and Italy are all also said to have "fundamental problems" with the plan.

Meanwhile, the UK appears to have softened opposition expressed by the previous administration. A government spokesperson said the UK supported further talks and would develop its position after considering a recent recommendation from its own advisors for the introduction of national energy taxes (ENDS Daily 4 November). EU-imposed taxation of domestic energy would not be acceptable under any circumstances, though, the spokesperson said.

At this week's meeting, EU finance ministers considered a progress report on negotiations and agreed that their officials should pursue further talks with a view to "assessing the prospects for decision" by next May. Negotiations will now focus on a number of potential exemptions suggested by the Austrian presidency to win over opponents.

These include "special provisions" for energy-intensive industries and firms which meet energy efficiency targets; exemptions from duties for mineral oils used by households; temporary zero rates and flexible deadlines for energy sources that are not already covered by EU legislation such as natural gas; and temporary derogations for some member states in applying the proposed increases in minimum duties for mineral oils.

Officials are also due to report on the likely effect of the proposal on inflation and competitiveness, individual purchasing power, transport costs and environmental policy.

Follow Up:
EU Council of Ministers, tel: +32 2 285 6111.

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