Diesel tax

Date: 28/05/03

By Karen Carstens

A EUROPEAN Commission proposal to harmonise commercial diesel fuel taxes has been strongly criticized in a UK parliament report which claims that it would cost the UK government almost €2.8 billion a year in lost revenue.

The EU sub-committee on economic and financial affairs in the House of Lords dubbed the proposal "confused" and rejected Commission claims that it would help the environment as "unfounded".

Instead, the committee warned that it would lead to increased traffic and harm the country's rail freight industry.

"While cuts in tax on diesel might delight lorry drivers, the potential economic and environmental consequences of this proposal make it unacceptable," said Lord Geddes, who chaired the inquiry.

"The proposal goes against the EU's 'polluter pays' principle and does nothing to make transport users face up to the real costs of transport."

Under the Commission's plan, ten out of the 15 member states would have to increase tax rates, though the four largest - Germany, the UK, France and Italy - would have to reduce theirs.

The first three experienced significant fuel tax protests in 1999 and 2000.