EU in deadlock over fuel duty exemptions

France leads opposition to compromise proposal, leaves itself open to legal action

EU finance ministers failed on Friday to agree a package of measures to allow France, the Netherlands and Italy to continue granting road hauliers big exemptions from EU-wide rules on diesel excise duty. The talks failed after France and Ireland refused to accept a compromise tabled by the Swedish presidency of the bloc.

The diesel fuel duty reductions were granted by the three states in the wake of last autumn's fuel protests (ENDS Daily 19 September 2000) (ENDS Daily 21 September 2000). Friday's stalemate leaves them technically illegal under EU law and open to challenge by the European Commission. Taxation commissioner Frits Bolkestein warned after the meeting he would "not tolerate a state of legal limbo until the cows come home."

Under the terms of a 1992 directive setting up minimum duty rates on fuels, member states can apply to grant certain sectors time-limited exemptions from duty for specific purposes. It is this option that France, Italy and the Netherlands, along with Belgium, used in the wake of the "fuel crisis" last autumn, to relieve pressure on their hauliers.

However, the derogations invoked by the first three countries expired at the end of last year. The finance ministers were discussing a European Commission proposal made in November to extend them - along with dozens of others on different "mineral oils" - for up to 5 years (ENDS Daily 16 November 2000).

In its compromise proposal, Sweden had suggested limiting the diesel tax breaks to two years and that each truck be limited to a maximum 40,000 litres a year of subsidised fuel. But French finance minister Laurent Fabius said the plan to end its option to give tax breaks in 2002 was unacceptable. Ireland objected over separate plans to restrict exemptions given to an aluminium smelter.

France last year attempted to renew its derogation before the deadline, but was blocked by Germany. Germany fears the tax breaks will threaten the competitiveness of its own hauliers, especially in areas close to the French border (ENDS Daily 4 October 2000). Ministers will meet again on 12 February to try and resolve the dispute.

Follow Up:
EU Council of Ministers, tel: +32 2 285 6211, and the official minutes of the meeting; European Commission, tel: +32 2 299 1111, and press release.

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