EU ministers seem unlikely to agree on coordination over energy taxes

BRUSSELS – European Union ministers meeting in Madrid today are unlikely to agree to introduce greater coordination on taxes for energy products as EU states are still split on several issues, officials said yesterday. The finance ministers, meeting ahead of this week’s EU summit in Seville, will also take stock of the fact the EU has made little progress in making Switzerland agree to share information on savings held there by EU residents. The European Commission, the EU’s executive arm, proposed in 1997 to introduce minimum EU tax rates on coal, natural gas and electricity, which at present are set freely by EU governments. The draft measures, which EU leaders want approved by the end of this year, would also gradually increase existing EU minimum tax rates on mineral oils to encourage greater energy efficiency for the benefit of the environment. But EU ministers have clashed while trying to introduce a wide range of exemptions for particular products or sectors, making it unlikely the Madrid meeting can produce a deal. «It does not look at all as there will be agreement at this meeting,» Jonathan Todd, spokesman for European Taxation Commissioner Frits Bolkestein, told a news briefing. To crack down on tax evasion, the EU wants to introduce measures that will allow automatic exchange of information on savings held in the 15-nation bloc. But some member states refuse to give up their prized banking secrecy unless other major financial centers, especially Switzerland, do the same. The energy tax dossier is stuck on three issues: tax breaks for energy-intensive businesses – like aluminum smelters or paper mills – lower taxes on diesel used by long-haul trucks and the length of transitional phase to introduce the new rates. Some member states, notably Greece and Portugal, are calling for a transition phase of up to 10 years for the new rules to come into force, something the Commission strongly opposes. The Commission, backed by Germany, is also against national tax breaks for road haulers and coaches. «We think this is one area where we need closer coordination because of the fact that international road haulage is liberalized in the EU since 1998 and therefore there is a great risk of distortion of competition,» Todd said. Spain, whose EU presidency ends on June 30 and who has long opposed raising taxes on energy products, softened its stance when France agreed at a summit in Barcelona in March to push ahead with energy liberalization which Madrid wanted. It proposed last month new minimum tax rates for certain products and guidelines on how the system should work. The plan includes the principle, which EU ministers have agreed on, that businesses should be taxed at a lower rate than private energy consumers. According to the proposal, EU states would have to introduce a minimum tax rate of 0.50 euros per megawatt on electricity for business. For private usage of electricity, the minimum rate would be one euro per megawatt. For coal and natural gas, the proposed minimum rates are 0.15 euros per gigajoule for business and 0.30 for private usage.