Brussels wants to raise tax on diesel

Brussels yesterday tabled proposals to revise the minimum excise duties on unleaded petrol and diesel in all 27 EU member states.

According to the Commission proposals, still to be agreed upon by member states and the European Parliament, Malta would have to increase its excise duties on diesel by 14 per cent by 2014. The duty on unleaded petrol in Malta, however, should not change as it is already above the new minimum thresholds suggested by the Commission.

Announcing the new proposal yesterday, European Taxation Commissioner Laszlo Kovacs said the aim of the proposal is to fight "tank tourism", whereby truck drivers in the haulage sector all over Europe alter their routes in order to benefit from low tax rates applied in certain member states. This, he said, is having a negative impact on the environment while distorting competition in the internal EU market.

Although Malta is not affected by "tank tourism" the proposal will still mean that diesel for daily use will become dearer as the Commission does not differentiate between member states or fuel used for commercial and non-commercial purposes.

According to the proposal, by 2012 the minimum excise tax on diesel and unleaded petrol has to reach €359 per 1,000 litres. This will be increased again to €380 per 1,000 litres by 2014 in all the 27-member states.

Until last July, Malta's excise duty on diesel stood at €332 per 1,000 litres. This means that by 2012, the excise duty on diesel will have to be increased by €27 per 1,000 litres and by a further €21 per 1,000 litres, two years later.

Although, according to the proposal, the same minimum taxes will apply to unleaded fuel, this should not have any impact in Malta as the current minimum excise taxation on this product is higher than the minimum taxes being suggested by the Commission for 2014. In fact, until last July, Malta's excise tax on unleaded fuel was €474 per 1,000 litres.

The Commission admitted that these proposals may increase the cost of fuel for private citizens.

"Since the minimum levels of taxation for commercial diesel will be increased and since the proposal foresees that in a given member state, unleaded petrol and non-commercial diesel cannot be less taxed than commercial diesel, the price of fuel used by private cars may increase in the member states taxing diesel and unleaded petrol at their current minimum levels.

However, the increase in retail price will not be automatic as experience has already shown that increase in excise duty may not necessarily be passed automatically onto customers," the Commission said.