Deadline set in row over fuel taxation

Date: 26/06/1997

By Tim Jones

FIVE governments face indictment for violation of EU tax laws unless member states can settle a long-running dispute over fuel taxation by the end of the month.

A dispute between the Dutch and Belgian authorities over The Hague's plans to introduce a lower rate of excise duty for petrol on its border with Germany is holding up agreement on the extension of 44 similar time-limited tax breaks.

Since five of these derogations applying in France, Sweden, Portugal, Greece and Spain expire on 30 June, failure to reach a deal would remove their legal foundation.

The European Commission would be free to begin infringement proceedings against all five unless a round of bilateral talks between the Belgians and the Dutch can resolve the matter.

“The issue remains on the table,” said a Belgian tax policy official. “The best result would be that the Netherlands withdrew its proposal because it is completely contrary to the idea of a single market. They are actually creating a new frontier within a country.”

Finance ministers agreed six years ago to set minimum levels for excise duties on mineral oils but allow for a number of derogations for public policy reasons; usually to keep energy-intensive industries in poor regions or to promote environmental protection.

Coming up with a new package of time-limited derogations was already a problem and the Commission was only able to put together a compromise proposal by including the Dutch request for a regional tax break.

The Netherlands claims that the availability of cheaper petrol on the other side of the German border due to lower excise duties and value added tax means that gas stations in its frontier areas cannot compete.

Belgian Finance Minister Philippe Maystadt acknowledges the problem, but is adamant in his opposition to a derogation which would effectively introduce two rates of tax in one small country.

“He is also afraid that if this is agreed then he will get a request from petrol stations on Belgium's border with Luxembourg for a similar derogation,” said a diplomat. There are few gas stations within 50 kilometres of the Luxembourg border because the price of petrol in the Grand-Duchy is so low.

Finance ministers were unable to reach an agreement on the issue when they met earlier this month and it was made plain that only a deal at prime ministerial level could do the trick. But officials say that the two countries' leaders had no time for a bilateral meeting on the issue during last week's Amsterdam summit.