Berlin threatens to block fuel tax breaks for truckers

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Series Details Vol.7, No.3, 18.1.01, p2
Publication Date 18/01/2001
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Date: 18/01/01

By Peter Chapman

GERMANY is threatening to block efforts to preserve special fuel tax breaks for truckers in three other EU countries in a move that could leave all member states open to prosecution, European Commission sources warned this week.

Finance ministers meet tomorrow (19 January) to debate a complex proposal which forces member states to re-apply for the right to grant tax breaks for mineral oils and does away with others that have become outdated. In the past, many of these exemptions from harmonised EU tax law were automatically extended.

At issue is special treatment doled out by France, Italy and the Netherlands to insulate their haulage sectors from high duties paid by the general public. Tax Commissioner Frits Bolkestein says these tax breaks should be allowed to continue for another two years provided they do not fall foul of EU rules on State aid.

He argues that the three countries charge higher fuel tax than many other member states such as Portugal, which has a rate just above the minimum amount allowed under EU rules. Bolkestein also claims that truckers from anywhere can take advantage of the low duties if they refuel in France, Italy or the Netherlands.

But diplomats say Germany's finance ministry is under pressure from transport officials to block the tax breaks allowed in the three neighbouring countries, for fear that approving them would spark demands from German hauliers for similar treatment. The fuel tax issue exploded across Europe last autumn as angry truckers blockaded several cities to protest against high prices.

Failure to reach a deal tomorrow would leave member states and the Commission in an embarrassing legal limbo over the proposal - with a host of tax breaks in other areas, for the time being at least, also in breach of EU law. These are measures for which 'derogations' from Union excise duty rules expired on 31 December last year and were not automatically renewed.

"Legally speaking they are not entitled to apply these derogations after the end of last year," said an aide to Bolkestein. "There is now a legal vacuum. If there were no agreement this week then the Commission would be obliged to begin to prepare infringement cases against member states."

Decisions in the tax field require unanimous approval by EU governments. That increases the need for careful behind-the-scenes deal-making to iron out problematic solutions before the full financial ministerial session.

Germany, like most other member states, wants to secure extensions to domestic tax break regimes in sectors other than the politically-charged road haulage industry. These include a special scheme for heating fuels used in the manufacturing industry, which the Commission said it could allow for another two years, and tax breaks for fuel used in public transport, which could be extended another five years.

As a result, there is some pressure on Germany to avoid antagonising other member states. A government source says Berlin has been in bilateral talks with the tax-break supporters but that officials were still awaiting details of a promised compromise plan from the new Swedish presidency before this week's meeting.

"We are willing to compromise, but if we have not seen this text then it is difficult to say if we will accept it or not," he said.

But another diplomat said he saw little chance of a deal, meaning that ministers must try to solve the problem at the next Ecofin session - scheduled for 12 February - as the spectre of EU court action looms.

Germany is threatening to block efforts to preserve special fuel tax breaks for truckers in three other EU countries in a move that could leave all Member States open to prosecution, European Commission sources have warned.

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