EU plans overhaul of fuel tax

The European Commission has today revealed plans to overhaul tax rules on energy products in the European Union. New rules aimed at making energy producers take into account both their […]

By Vicky Ellis

The European Commission has today revealed plans to overhaul tax rules on energy products in the European Union.

New rules aimed at making energy producers take into account both their carbon emissions and energy content will impose a tax of €20 per tonne of CO2.

Algirdas Šemeta, EU Commissioner in charge of Taxation, Customs Union, Audit and Anti-Fraud said: “The modernised energy taxation system comes at the right moment. Member States are now defining their strategies to exit from the crisis and meet the Europe 2020 targets. They call for action to reduce our dependency on fossil fuels. A fair and transparent energy taxation is needed to reach our energy and climate targets.

“Our common goal is a more resource-efficient, greener and more competitive EU economy. This proposal sets a strong CO2-price signal for businesses and consumers, it is also an opportunity to shift the tax burden from labour to consumption, in order to favour growth enhancing taxation.”

Under new proposals, the current Energy Taxation Directive would be revised to split the minimum tax rate into two parts. One part would be based on CO2 emissions of the energy product and would be fixed at €20 per tonne of CO2.

The other part would be based on energy content – the actual energy that a product generates measured in Gigajoules (GJ). The minimum tax rate would be fixed at €9.6/GJ for motor fuels, and €0.15/GJ for heating fuels, and would apply to all fuels used for transport and heating.

The proposal will now be discussed by the European Parliament and the Council and is expected to be in force from 2013, with some commentators suggesting that full introduction of the new rules will take until 2023.

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