Diesel users may lose their tax break at the pump

Minimum taxes for diesel should rise to equal petrol tax minimums, the European Parliament has said. The current EU-wide minimum rate of tax on diesel should be increased to match the current minimum rate for unleaded petrol, many MEPs said. They also want to set a limit on further petrol and diesel tax increases in the Member States which already have the highest taxes. The European Commission said the wide variation in rates of diesel (officially known as gas oil) taxes creates distortions in the road haulage market – and also increases environmental damage by encouraging “fuel tourism” by hauliers (i.e. making special journeys or using longer routes in order to fill up in a country with low taxes.) Also, since diesel and petrol have similar impacts, especially from the point of view of CO2 emissions, there is no environmental reason for the two minimum rates to differ, they argued0. The Commission is proposing to raise the minimum rate on diesel up to the minimum rate on petrol. The parliament, by a vote of 447-64, supported the Commission recommendation and a report from MEP Ollie Schmidt of Sweden, but they also the minimum taxes on diesel should rise more slowly, from the current level of 302 Euro per 1000 litres to the current petrol level of 359 Euro by 2015 rather than 2012. Latvia, Lithuania, Poland, Bulgaria and Romania should have until 2016 to reach the target. Contrary to the Commission proposal, MEPs said Spain, Austria, Belgium, Luxembourg, Portugal and Greece did not need a transitional period. The parliament’s taxation committee opposed the Commission’s plan to increase both minimum rates to 380 Euro in 2014. And, with a view to avoiding divergence between tax rates getting worse, MEPs said those countries with current tax rates over 400 Euro on diesel and 500 Euro on unleaded petrol should not increase their taxes further until 2015. Parliament’s role is only advisory in this case, but once the plenary has voted, the final decision is for the European Council, which can act only if it can reach unanimity. In the United Kingdom, current tax levels are well above the minimum EU levels, and this would still be true after the increases proposed by the Commission, so these changes would have little practical impact. If the Council were to adopt MEPs’ proposal of a moratorium on further rises, this would affect the UK. The increases proposed by MEPs would make little difference in Ireland for the same reason, but an increase would be needed in the tax on diesel to if this was to reach the Commission’s goal of 380 Euro per 1000 litres above the current 368 Euro.