Heat turned up over fuel tax reductions

Date: 26/10/00

By Renée Cordes

THE European Commission is stepping up pressure on member states to justify the temporary fuel tax breaks they offered to protesting lorry drivers last month, amid concern that the measures contravene EU state aid and internal market rules.

In September, the Commis-sion sent letters to France, Italy, the Netherlands and Belgium asking for details of the concessions made to truckers who set up roadblocks to protest against soaring petrol prices. Rome and The Hague replied to those requests this week, albeit after the deadline, but the other two countries have not - prompting warnings that if they did not do so soon, the Commis-sion would write again in more forceful terms demanding a reply.

Officials said the executive was also considering adding Spain to the list of countries under investigation, but stressed it was too early to say whether the institution would launch legal proceedings against any of the member states concerned.

Energy and Transport Commissioner Loyola de Palacio has repeatedly questioned the effectiveness of such measures, arguing for a broader approach towards EU energy policy. "We must resist the temptation to offset rises in oil prices by cutting taxes," she said recently. "Doing so would run counter to our environmental objectives - and would amount to transferring tax revenue to the member countries of OPEC."

The move comes as the Commission faces mounting pressure to act from those who argue that the tax breaks distort the EU's single market. The heads of several German state governments voiced their concerns at a meeting with Commission President Romano Prodi this week, warning that the concessions harmed competition and threatened jobs in small and medium-sized German firms.

The European Commission is stepping up pressure on Member States to justify the temporary fuel tax breaks they offered to protesting lorry drivers last month, amid concern that the measures contravene EU state aid and internal market rules.