| Author (Person) | Fleming, Stewart |
|---|---|
| Series Title | European Voice |
| Series Details | Vol.11, No.32, 15.9.05 |
| Publication Date | 15/09/2005 |
| Content Type | News |
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By Stewart Fleming Date: 15/09/05 EU officials have embarked on a round of back-biting after an agreement between finance ministers not to cut taxes on oil disintegrated. Ministers from the 12 eurozone countries meeting in Manchester on Friday (9 September) drafted a statement which called for governments to rule out "cuts in energy taxes". The wording was weakened in a statement released on Saturday after the informal Ecofin gathering of ministers from all 25 EU states. The statement said that "distortionary fiscal and other policy interventions that prevent the necessary [oil price adjustments] should be avoided". On Tuesday (13 September) the French President Jacques Chirac offered farmers tax breaks and refunds on fuel worth €30 million, an announcement which cut across the agreement reached in Manchester and was greeted with astonishment in some capitals. "We are very disappointed that the French finance minister, who spent a whole morning in the Eurogroup last Friday discussing a statement calling for cuts in energy taxes to be avoided, appears to have accepted breaching the Manchester agreement as soon as he returned to Paris," a senior EU finance ministry official remarked yesterday (14 September). He suggested that Thierry Breton, the finance minister, might have been overruled by Chirac. The criticism was privately echoed in other finance ministries. Hungary has promised to lower value-added tax (VAT) on fuel from 25% to 20%. In Poland, where elections are imminent, the government promised to reduce excise duties on petrol. The Belgian government has said that it will fund a discount equivalent to VAT on home heating fuel. In Austria the government threatened to impose a windfall tax on the profits of leading petrol companies. Prices fell soon afterwards. A Commission official said yesterday: "It all looks very messy. It is hard to see how some of these moves are in the spirit of the Ecofin statement." The Commission's efforts to co-ordinate government responses to the oil shock appear to be floundering. Jean-Claude Trichet, president of the European Central Bank, told the European Parliament yesterday that eurozone ministers had agreed that energy taxes should not be reduced in response to the rise in oil prices, but that assistance could be given to the poorest citizens. Trichet said that governments had to ensure that the burden of higher oil prices fell not only on manufacturing industry but was shared by others, including consumers. His remarks reflected the mounting official concern across Europe about the surge which has taken the price of oil to a recent peak of $70 a barrel. "We must, above all, not commit the errors that were made after the first oil shock [in 1974] and for which Europe paid a high price," said Trichet. Finance ministers, in trying to reach a co-ordinated response, were anxious to avoid a situation in which concessions to farmers or truck-drivers in one country could put pressure on other governments to follow suit. There are worries, too, that tax concessions might further weaken the finances of France, Italy and Germany, which are breaching the budget rules of the Stability and Growth Pact. The EU is also urging the Organisation of Petroleum Exporting Countries to increase crude oil output, calling on oil companies to boost investment in exploration and new refinery capacity and is seeking increased transparency in the opaque oil markets. The Informal Ecofin Council, Manchester, 9-10 September 2005 discussed the current economic situation and in particular the impact of rising oil prices. Ministers agreed a statement which included: 'Ministers emphasise their continuous effective coordination in reaction to rising oil prices and agree that distortionary fiscal and other policy interventions that prevent the necessary adjustments should be avoided. In particular, Ministers confirm that where short-term targeted measures are taken to alleviate the impact of higher oil prices on the poorer sections of the population, they should avoid distortionary effects' . Days later France, Hungary, Poland and Austria all announced 'distortionary' measures. |
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| Source Link | http://www.european-voice.com/ |
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| Subject Categories | Energy, Taxation |
| Countries / Regions | Europe |
