Time running out for truckers’ fuel tax deal

Date: 08/02/01

By Peter Chapman

PARIS and Berlin are racing against the clock to reach a compromise over fuel tax breaks for truckers and avert European Commission legal action against member states.

Diplomats say France and Germany are the key antagonists in a row that threatens to escalate to all corners of the EU at next week's meeting of finance ministers.

"Talks are ongoing but it is likely to go to the wire at the Council," said one EU diplomat.

Failure to strike an agreement paves the way for legal proceedings by the Commission, which argues that these and a raft of other fuel tax breaks are technically illegal until they are formally approved by all 15 member states.

Tax chief Frits Bolkestein warned last month that his patience was running out and that he could no longer ignore the issue "until the cows come home".

"If no agreement is forthcoming, the Commission can get cracking," said another diplomat.

Berlin sparked the dispute last month after it held out against approving an exemption for tax breaks granted to hauliers in France, Italy and Netherlands. German Finance Minister Hans Eichel, angered that fellow member states backtracked on an agreement made last year in Versailles not to bow to domestic pressures for cut-price diesel, refused to ratify Bolkestein's view that the measures would not harm the EU's single market.

But diplomats say a key problem is that France, which still has one of the highest diesel prices in the Union, made firm commitments to lower taxes for two years that will be politically difficult to water down.

Under the scheme unveiled last year in response to protests and road-blockages that shut down several European cities, truckers were offered a discount of €0.0381 a litre in 2001 and an additional cut of 0.0213 in 2002.

Calls for Paris to gradually reduce the tax break over the two-year period and promise not to re-apply for an exemption after that are also failing to win sympathy, as is a push to limit the amount of subsidised fuel that any one truck is allowed.

Meanwhile Irish sources say Dublin is angry over the way the same overall tax proposal could scupper a key part of its energy policy.

The Commission plan placed a five-year time limit on other tax breaks as part of a general policy to simplify the hotch potch of exemptions that are distorting the EU's single market for the fuel sector. But Ireland claims it is entitled to an unlimited exemption for special measures such as tax discounts to an aluminium works.

Although the country could attempt to re-instate the measures, Irish diplomats say the Commission plan adds uncertainty to the system.

Paris and Berlin are racing against the clock to reach a compromise over fuel tax breaks for truckers and avert European Commission legal action against Member States.