Response to the public consultation of the European Commission on narrowing excessive differences in the tax levels applicable to commercial diesel
Publication date: 15 September 2006
As the voice of over forty million motorists in the European Union, the Fédération Internationale de l’Automobile (FIA) feels the necessity to comment on the intention of the European Commission to align the taxation of commercial diesel fuel.
The FIA in principle welcomes a harmonisation in the field of fuel taxation. However we are concerned about the intention of the Commission to exclusively address the commercial use of diesel fuel as this would probably lead to a tax differentiation between commercial and private purposes. Our objections are based on a number of arguments, which make such a differentiation unacceptable to the ordinary motorist. It would lead to a further increase of the cost of motoring and be counterproductive in terms of environmental policy.
The FIA rejects the Commission’s plans for differentiated excise duty rates on diesel for commercial and private purposes. Such a measure potentially discriminates against users of private diesel vehicles. The FIA believes that such a measure is not based on a factual or scientific basis.
Rather, we fear that one consequence of this differentiation could be that the proposal could 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. We do not see a reason why the commercial sector should get this preferential treatment!
The FIA also has environmental reasons for opposing the proposal. We do not see the environmental benefit that the Commission is suggesting. Scientific data show that diesel cars produce around 15% less CO2 emissions than petrol cars. 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. It is therefore the view of 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.
The FIA welcomes the public consultation carried out by the Commission in the process to defined future tax policy and hopes that the given answers will be taken into account.
a) Do you consider the current state-of-play satisfactory (option A)?
The current situation is based on an equal taxation of diesel fuel whether it is used for private or commercial purposes. This equal treatment given to private or commercial is perfectly justified. Cars are largely used for journeys between home and work place and to bring goods from the point of purchase to the customer’s home. These journeys are as indispensable to economy and society as is the transport of goods and passengers.
In the long term the FIA in principle welcomes a harmonisation in the field of fuel taxation, as long as this harmonisation does not exclusively address the commercial use of diesel fuel. We are aware that haulage companies may take into account tax differences when planning their routes. However we are also aware that so-called “tank tourism”, i.e. private car owners planning trips to take advantage of tax differences, is taking place in many areas in the European Union. This matter of fact results in budgetary losses for the Member States with high excise duty rates and budgetary benefits for the ones with low excise rates.
The FIA would therefore in the long term welcome a harmonisation in the field of fuel taxation for diesel and petrol fuel independently from the use, commercial or not.
b) Do you see a need for a full harmonisation (option B)?
Please see answer to question a).
c) Do you see a need for an approximation of tax levels of commercial diesel between Member States (option C)?
Please see answer to question a).
d) Which option will best guarantee a level-playing field for all haulage companies? Explain the reason why.
The Energy Tax Directive defines commercial diesel as diesel fuel used for the following purposes: 1) the carriage of goods by motor vehicles intended exclusively for the carriage of goods by road and with a maximum permissible gross laden weight equal or superior to 7.5 tonnes; 2) the carriage of passengers by a motor vehicle of category M2 or category M3 (as defined in Directive 70/156/EEC).
If the proposals of the Commission lead to a tax differentiation between commercial and non-commercial traffic, the tax for commercial traffic becoming lower than the tax for non-commercial traffic, transport using larger vehicles with a weight equal or superior to 7.5 tonnes or larger busses of the categories M2 or M3 will be privileged compared to the actual situation. The FIA believes that there is no justification for such a privilege.
The FIA agrees with the view of the Commission the opportunities to take advantage of tax differences are different according to the haulage companies, depending on how they operate, and that this may create distortions of competition. However, the FIA would like to stress that such distortions are not specific for larger vehicles with a weight equal or superior to 7.5 tonnes or larger busses of the categories M2 or M3, but affect all types of vehicles covering long distances and crossing borders.
e) Do you think that some of the foreseen options will increase administrative costs for road haulage companies?
In the options B and C outlined in the consultation document the Commission foresees that in case the excise duty for commercial diesel differs from the duty for non-commercial diesel, the indicated price in petrol stations of commercial and non-commercial diesel would remain identical. Haulage companies would be refunded the difference in taxation via a refund mechanism applied at Member State level.
The FIA believes that the mechanism of the tax reimbursement would lead to an additional bureaucratic burden that is not in line with the Commission’s better regulation policy.
f) Do you think that some of the foreseen options could reduce drivers' working hours? If yes, explain the reason why (fewer route detours…).
Price differences that currently exist between the member states due to differences in taxation are taken into consideration and used by the consumers. Private motorists living close to national borders (e.g. in Germany close to Austria or Luxembourg) take advantage of these differences by travelling to the border to fill-up their fuel tank. However the cost of the travelled detours cannot exceed the price advantage of the purchased fuel.
Haulage transport take advantage of these differences by planning their refuelling stops. It is not likely that haulage transport travels detours as the time factor plays an important role. One of the most important European routes leads from the North of Germany to Italy. The choice between travelling through Austria or Switzerland is done rather on the basis of tolling than of fuel prices.
g) Do you think that some of the foreseen options will reduce car accidents and/or congestion, because of fewer route detours in order to benefit from tax differences?
The number and the length of route detours on the basis of fuel prices are not significant. Please see also answer given to question f)
h) Do you think that some of the foreseen options could have an impact on employment? If yes, explain how and in which direction (reduction or increase).
An impact on employment at petrol stations in border regions is possible. However there would be no impact for lorry drivers.
i) Do you think that some of the foreseen options could reduce the number of diesel consumers? If yes, explain the reason why.
A differentiation would allow member states an approximation of the taxation of diesel fuel used for private purposes and petrol fuel. This would punish those drivers who have opted for diesel cars as diesel has long been privileged in taxation.
The fuel efficiency of diesel cars is an important pillar in the strategy to attain the European CO2 emission objectives. These CO2 emission objectives will not be achieved in the foreseeable future without increasing the share of diesel cars. By reducing the incentives for diesel cars, the Commission is putting its own CO2 reduction policy in jeopardy. The research on diesel hybrid technology with unprecedented fuel efficiency might be abandoned if diesel taxation is increased.
In this respect the FIA welcomes the taxation reform as proposed in Directive COM(2005)0261 and calls upon the Commission to encourage financial incentives for fitting particle matter filters.
j) Do you think that some of the foreseen options will have consequences in terms of production of and/or demand for bio diesel? Explain the reason why.
The pricing of biodiesel is a problem that needs to be dealt with separately. This is not related to the taxation of fossil diesel fuel or the differentiation between private and commercial purposes. Other factors are determining: tax rebates for biodiesel, guaranties for these tax rebates, price policy of producers (market price or cost price).
The intention of the Commission is to converge the taxation rates to 302 €, later to 330 € for diesel and to 359 € for petrol. Different taxation rates are currently applied in some EU member states according to for example the level of sulphur or the percentage of biodiesel that is being mixed-in. It is not clear which taxation rate would then – theoretically – be applied and whether the tax rebates for biodiesel could remain.
k) Do you think that some of the foreseen options will increase the demand for means of transport other than the road transport?
As outlined above one consequence of this differentiation could be that the proposal could 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.
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 everyone’s prosperity. The FIA believes that this proposal could be a mechanism to increase the already high taxes motorists pay. It will not reduce the demand for road transport, will simply punish motorists.
l) Do you have any further observations you would like to add?
The FIA believes that a differentiation would lead to fraud as it would be difficult to fully distinguish smaller and larger vehicles.
An important aspect regarding the CO2 emissions trade has to be taken into consideration. The emissions reduction targets for CO2 fixed in the Kyoto protocol have been determined following the national fuel consumption. Countries with high “tank tourism” have been allocated more CO2 emissions according to the fuel consumption. Countries from which motorists go abroad to fill their tanks have been allocated less CO2. If the European Commission takes measures stopping “tank tourism” the CO2 emissions reduction target need to be adapted accordingly.
The FIA is pleased to have had the opportunity to participate to this consultation, in the hope that the formulated remarks and suggestions will be taken into account when defining the research priorities. We remain available for comment on all subsequent steps in this debate.
For more information please contact:
FIA European Bureau
Rue d'Arlon 53
Tel. +32 2 282 08 25
Fax. +32 2 280 07 44