Malta applies for renewal of duty-free fuel concession

Malta has formally asked the European Commission to renew a concession negotiated before its EU accession which allows the yachting and pleasure aircraft sectors to continue to benefit from duty-free fuel.

According to the Accession Treaty, the concession granted to Malta ends by the end of this year as this was only a transitional measure. However, the government is now trying to persuade the Commission to extend this temporary derogation particularly for the benefit of Malta's maritime industry.

Sources close to the Commission told The Times yesterday that the Maltese government has submitted a formal application to the Commission's taxation directorate. The application also includes a detailed study justifying a renewal of the concession.

The sources said the Commission has already made it clear it is not keen on prolonging such concessions, however each case is to be considered on its own merits. The sources said a decision by the Commission over this issue is expected by the end of next month.

Originally, the concession, granted under the Energy Tax Directive, stipulated that yacht and aircraft owners had the possibility to continue buying duty-free fuel until the end of 2006. This concession applied only in the case of boats and aircraft leaving Malta's territorial waters and airspace, something which almost all medium-sized yachts and aircraft do. Malta is not the only EU member state that was given this concession.

Taxation Commissioner Laszlo Kovacs last month spoke against the renewal of such concessions. Answering a parliamentary question by Nationalist MEP Simon Busuttil, Mr Kovacs said the Commission feels such derogations should end as they contradict other community policies and the polluter pays principle.

However, he added that should member states consider that the derogations could still be justified, they were free to submit a formal application for a renewal of the derogation duly supporting their request.

Before the 2004 EU enlargement, the new acceding member states were given various concessions under the Energy Tax Directive in order to allow their markets to adapt slowly to the changes they had to introduce due to EU membership and prevent an adverse effect on their economies.