MEPs target excise reforms

Date: 13/06/1996

By Fiona McHugh

SWEEPING reforms in the EU's excise duty regime will be demanded by MEPs in a series of reports due to be adopted by the European Parliament at its plenary session next month.

As Union governments and industry continue to wait for the European Commission to come up with firm tax proposals, MEPs growing impatient with the long delay are taking up the cudgels.

They will vote in July on three reports, including one from Christian Democrat MEP Karla Peijs which calls for an overhaul of the current tobacco duty structure designed to prevent the gap between member states' rates from widening.

The Dutch co-rapporteur is urging the Commission to amend its directive on excise duties to repair faults in the existing system. She will also suggest harmonising excise duty rates on tobacco upwards and call for minimum rates to be set by the EU and maximum rates by member states.

The harmonisation of excise duties has long been an objective - so far an unattainable one - of the Commission.

But in spite of this, EU tax rules inadvertently contain measures which could lead to a greater divergence, rather than convergence, in duty rates on cigarettes.

Under these rules, high-rate member states could in theory be forced to increase still further the excise duties they impose on tobacco products when other price components, such as the factory gate price, rise - although this has yet to happen.

In a review of the duty regime published last year, the Commission acknowledged the potential danger inherent in the existing structure, but failed to agree on corrective measures.

Taxation Commissioner Mario Monti withdrew proposals to address the problem after they came under fire from other members of the Commission.

In a separate report dealing with excise duties on mineral oils, Irish Liberal MEP Pat Cox advocates switching the tax burden from labour to products such as fuel to help create jobs in the Union.

His proposal echoes recommendations made by Monti and, earlier, by former Commission President Jacques Delors in his White Paper on Growth, Competitiveness and Employment.

Cox claims the Commission should examine “the extent to which the active employment of excise duties on mineral oil would generate indirect tax revenue as an offset for direct taxes on labour”.

He also suggests the use of excise duties to encourage environmentally-friendly behaviour, advice unlikely to be welcomed by Monti, who has condemned the hijacking of tax by other policy departments.

The Irish MEP calls for a “substantial increase in minimum rates on motor fuels” and wants dirty fuels to be penalised through high excise rates.

In a third report focusing on the question of alcohol duties, which will also be voted on at next month's plenary session, British Socialist MEP Bill Miller dismisses the use of excise duties to provide extra cash for governments, saying “the use of increases in excise duty as a fiscal instrument to fund reductions in statutory labour charges is only partly feasible in the short term and is fundamentally flawed in the long term. Excise on all alcoholic drinks raises only 0.8&percent; of total European Union revenue.”

Miller calls on the Commission to draw up a report on the overproduction of wine and tax policy, hinting at the possible use of duties as a means of reducing production. He also asks the Commission to impose duties on all new forms and mixtures of alcohol, such as alcoholic lemonade and ready-made cocktails.

The flurry of parliamentary reports underlines the growing concern of many about the lack of progress in this area, seen as vital to the smooth running of the internal market. However, in this most politically sensitive of fields, where fears about handing over fiscal sovereignty to the EU are rife in many members states, decisions can only be taken by unanimous agreement among EU governments.