Truck drivers who seek out Europe’s cheapest diesel in a practice known as “fuel tourism” would have the lucrative tax loophole partially closed under a plan being drawn up in Brussels.
Laszlo Kovacs, European Union tax commissioner, claims fuel tourism costs some national exchequers hundreds of millions of euros a year and damages the environment as truckers go out of their way to find discount diesel.
He wants to impose a sharp increase in the EU’s minimum level of excise duty for commercial diesel to iron out some of the biggest cross-border variations, but his plan has run into stiff opposition.
Charlie McCreevy, the Irish EU internal market commissioner, and Dalia Grybauskaite, the Lithuanian EU budget commissioner, forced a delay in this week’s expected announcement to allow further debate.
The two liberal commissioners oppose the principle of Brussels promoting tax rises. They support price competition. “To make the European economy competitive we should decrease taxes on oil in general,” Ms Grybauskaite said.
Poland and the Czech Republic have reservations about the plan: both countries are popular destinations for truck drivers avoiding higher duties in neighbouring Germany.
Other new EU members like Lithuania are worried that a higher harmonised rate would force up haulage costs and shop prices.
Luxembourg, a tiny fuel paradise in the heart of high-tax western Europe, also has concerns about the scale of the duty rises envisaged by Mr Kovacs. All EU tax proposals have to win unanimous support from all 27 member states.
“We are not happy, but there are other countries which are more unhappy than us,” said a spokesman for Jean-Claude Juncker, Luxembourg prime minister.
The village of Martelange in the Ardennes is one of the most vivid examples of fuel tourism in Europe. The busy main street is half in Belgium and half in low-tax Luxembourg: the Luxembourg side is lined with petrol stations with queues of trucks and cars seeking some of the cheapest fuel in the region.
Mr Juncker’s spokesman admitted that a flattening out of excise duties would hit his country’s exchequer, but said it could help the Duchy to meet its Kyoto climate change obligations.
A study by the European Commission found that fuel tourism cost Germany an estimated €1.9bn ($2.5bn, £1.3bn) in lost tax on diesel, on top of which could be added lost duty on petrol station sales of cigarettes.
It cited a study showing that Germans were willing to drive two to four extra kilometres for each euro cent differential in diesel price compared with a neighbouring country. Germany charges a duty of €470 per 1,000 litres compared with €285 in Luxembourg.
The minimum level of excise duty is harmonised across the EU at €302 per 1,000 litres from 2004 and €330 in 2010. Mr Kovacs wants to raise those minimums to €359 in 2012 and €380 in 2014.
Some new EU members have transitional arrangements with fuel duties as low as €220, while the UK has the highest duty at €693. Fuel accounts for 20-30 per cent of a haulage company’s operating costs.
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