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Answer to the EC Proposed Council Directive on Diesel Fuel


Publication date: 20 May 2002


The recent proposal to amend the Directives 92/81/EEC (on the harmonisation of  the structures of excise duties on mineral oils) and 92/82/EEC (on the harmonisation of the rates of excise duties on mineral oils) presented by the Commission provides for: a) a harmonised and thus an increased rate of taxation on diesel fuels for commercial purposes within the European Union and b) differential rates of excise duties on diesel fuels for commercial and private purposes with a view to aligning the excise duties on unleaded petrol and diesel fuel for private use.

 

The proposal expressly gives the Member States the power to increase the excise duty on diesel fuel used for private purposes.  The necessity of a harmonisation of the rates of excise duties on mineral oils is ignored.  De facto the proposal has two key aims: a) to increase the rate of excise duties on mineral oils for private purposes (approximation or alignment to the rate for unleaded petrol) above the rate applying to commercial diesel fuel and b) the harmonisation of the taxation of diesel fuel used for commercial purposes above current levels.

 

It is the view of the AIT and the FIA that the proposal should be seen as a programme for increasing taxes, and thus should rejected.  Motorists already pay some € 270bn a year in taxes.  It is unfair to expect them to pay anymore.  Additionally, it is unrealistic and unfair to expect motorists to pay for the sins of all road users.  Why should commercial road users pay less when their externalities are much higher than the individual car users’?

1. Proposed Future of Diesel Fuel Taxation

Implementation of the Commission Proposal would require two different minimum rates for taxing diesel fuel - one for private and one for commercial purposes.  The Commission is proposing to introduce a central Community rate of excise duty on commercial diesel fuel. Member State rates would be allowed to fluctuate their within a band - gradually narrowing towards zero by the year 2010 -  on either side of the central Community rate.  From 2003, a central Community rate of € 350 /1000 litres with a fluctuation band of plus/minus 100 Euro would apply.  From 2004 the central Community rate would be subject to an automatic annual increase based on inflation.  

 

For the taxing of diesel fuel used for private purposes the Commission recommends that the Member States gradually align their respective rates with that of the rate on unleaded petrol.  From 2006 an EU-wide minimum rate for unleaded petrol and non-commercial diesel fuel of 360 Euro/1000 litres would apply.  This would mean an increase of today's minimum rates by 47% for diesel fuel and by 25% for petrol.  In principle, the minimum rate for non-commercial diesel fuel would at least be kept level with the rate on commercial diesel duel.  Also in the future there will be no maximum rate of excise duty on private fuels.

2. AIT and FIA Position

Representing over 40 million motorists in the European Union, the AIT and the FIA feel that it is necessary that we comment on the Commission’s proposals. Our rejoinders will be based on a simple premise: the car and car users should be placed at the heart of the policy agenda.  Policy-makers need to recognise the centrality of the car in Europe’s modern society and economy.  To ignore the car or to attempt to increase the cost of motoring threatens every-ones‘ prosperity.  The AIT and the FIA believe that a radical rethink of Europe’s motoring tax systems is needed so that we may pursue our shared goal of sustainable mobility.  However, it is our view that this proposal is not the correct tool for ensuring this aim.  Rather it is simply a mechanism to increase the already high taxes motorists pay.  It will not contribute to reducing emissions and will simply punish motorists.  

 

The AIT and the FIA reject the Commission’s plans for differentiated excise duty rates on diesel commercial and private purposes.  Such a measure discriminates against users of private diesel vehicles.  The AIT and the FIA believe such a measure is politically motivated with factual or scientific basis.  Beyond this, the proposals are plainly unfair.  Why should commercial users get privileged treatment?  There is certainly no environmental benefit as the Commission is suggesting.  Rather, it seems that the Commission's main objective is to pave the way for ‘convenient’ or ‘easy’ tax increases for the private car user without having to deal with vocal objections of the road haulage industry.  Indeed the proposal would allow Member States to compensate for any reductions in commercial fuel excise duty simply by increasing the duty on private road users.  Why should the commercial sector get this preferential treatment?

 

It is the considered opinion of the AIT and the FIA that the approximation of the taxation of diesel fuel used for private purposes and petrol is wrong and would punish those drivers who have opted for diesel cars.  Throughout Europe the number of diesel cars is increasing.  This is due in part due to the fact that diesel cars are now cheaper to run than petrol cars.  Over the last few years the price of unleaded fuel has increased greatly meaning that those on small budgets, or those wishing to save money, have opted for diesel.  Additionally, diesel cars are more fuel efficient.  Thus, increasing the price of diesel will unfairly punish the prudent and those on lower incomes, who based their purchasing decisions on the legitimate expectation that the price of diesel will remain lower than that of petrol.  Why should the expectations of these people be destroyed, whilst commercial users can continue to look forward to cheaper fuel.  Are commercial road users any more special than private users?

 

The AIT and the FIA also has environmental reasons for opposing the proposal.  A comparison between the data provided by car manufacturers shows that diesel cars produce 17%-22% less emissions than petrol cars.  Our own scientific data show that these figures can rise up to diesel cars produce up to 28%.  Thus, it is important to keep in mind that ambitious CO2 emission targets will not be achieved in the foreseeable future without increasing the number of diesel cars on our roads.  Indeed, this is recognised by the Commission in its proposal.  It is therefore the view of the AIT and the FIA that tax measures making the diesel car less attractive would, with a view to the CO2 reduction targets, be counterproductive and should be avoided.

 

Overall the, the AIT and the FIA is opposed the Commission’s proposal.  Our objections are based on a number of arguments which make these proposals unacceptable to the ordinary motorists.  Not only are the proposals patently unfair, they will further increase the costs of motoring, and thus punish motorists.  The proposal also does not make environmental sense.  By reducing the incentives for buying diesel cars, the Commission is putting its own CO2 in jeopardy.  The AIT and the FIA are in favour of a root and branch reform of the tax base so as to encourage  sustainable motoring, however, these proposals are not the correct response to the problem.  They will only serve to punish motorists and contribute nothing to the battle to reduce emissions.   

 

For More Information Contact:

AIT&FIA European Bureau
Rue d’Arlon 50
1000 Brussels
Belgium

Tel: +32 (0)2 282 0825
Fax: +32 (0)2 280 0744

 


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