Finns test waters on possible Spanish energy tax opt-out

Date: 07/10/1999

By Simon Coss

THE Finnish presidency is considering offering Spain the chance to opt out of plans to introduce a Union-wide energy tax in a bid to break the deadlock over the issue.

Finnish diplomats say they will use a meeting of national tax experts at the end of this month to sound out EU governments' views on a possible Spanish exemption, given Madrid's adamant opposition to the proposal.

The move comes after the European Parliament's environment committee suggested late last month that member states should use powers they gave themselves under the Amsterdam Treaty to introduce the new tax in those member states which are prepared to adopt it.

Their call echoed similar suggestions by Dutch Finance Minister Gerrit Zalm in July.

Finnish Environment Minister Satu Hassi told MEPs that she agreed with the idea in principle and had spoken to European Commission and Finnish finance ministry officials about it. However, Hassi's governmental colleague, Finance Minister Sauli Niinistö, was less up-beat when he spoke to the Parliament's economic and monetary committee the next day. He confirmed the issue would be discussed at this month's working group meeting, but added that governments had given the idea a mixed reception.

Several non-Spanish diplomats have pointed out that Article 11 of the Amsterdam Treaty, which allows for smaller groups of EU member states to push ahead with policy initiatives without the rest if a solution acceptable to all cannot be found, also says that any such moves should not lead to distortions in the internal market.

"I think this would be a very difficult case for applying Article 11, as there are key questions of competition raised when one member state faces less stringent tax rules than the others," said one.

As all EU taxation proposals have to be agreed unanimously, this does not bode well for hopes of breaking the energy-levy deadlock.

Madrid's reaction to the possibility that it might be allowed to opt out of the proposed new tax has been guarded. Officials say no one has yet approached Spain formally with such an offer, but add that Madrid would certainly consider the idea if it was presented in such clear terms.

The proposal to introduce harmonised minimum levels of tax on most basic energy products was drawn up by new Competition Commissioner Mario Monti, when he was in charge of the internal market dossier in Jacques Santer's team.

Both the Commission and the European Parliament argue that EU governments must adopt the plan if they are to have any hope of reaching the tough targets for reducing greenhouse gas emissions agreed at United Nations-sponsored talks in Kyoto, Japan, in 1997.

The Finnish Presidency is considering offering Spain the chance to opt out of plans to introduce a Union-wide energy tax in a bid to break the deadlock over the issue.