Battle lines drawn on single fuel tax
McCreevy and British Chancellor Gordon Brown insist Europe must play no part in deciding what taxes individual countries levy on their citizens. But the European Commissioner for the Internal Market, Frits Bolkestein, has declared war on the issue by proposing to bring taxes on cars and diesel into line in all 15 member states.
He points out that all the governments have signed up to creating a single market for goods and services throughout the EU. But when one country charges less tax than another on goods such as diesel, the market becomes distorted.
He gave as an example the long queue of lorries one always sees at diesel filling stations in Luxembourg, which has the lowest excise rates. In contrast, truckers from Britain, where duty is double what it is in most other countries, travel to the continent with as little fuel in their tanks as possible and fill up in France, Belgium or Holland.
Mr Bolkestein is proposing that every country should levy 350 per 1,000 litres for diesel bought for trucks over 16 tonnes or buses that carry more than nine people.
At present, Ireland charges 301.94 in duty per 1,000 litres of diesel while Britain levies 750.
"You can understand why British lorries travel with just a teaspoon of fuel to the continent where they can fill up their huge tanks that can hold enough fuel for 2,000 kilometres," said Mr Bolkestein.
He maintains that the British Government is losing revenue and believes that if the same rate of excise was charged across the EU there would be more real competition at the pumps and lorry drivers would be less inclined to detour for cheap fuel.
However, neither Gordon Brown nor Charlie McCreevy are interested in the arguments for a better functioning of the internal market. A spokesperson for Mr McCreevy said yesterday: "We do not favour such measures in principle because we believe the question of tax should be determined by the national governments, irrespective of the internal market."
At present there is an agreed minimum rate charged on unleaded petrol and the Department of Finance is happy enough with this. However, Mr Bolkestein plans to increase the present rate of 287 to 360 over four years, and extend it to apply to diesel for non-commercial vehicles.
The increase is to take account of inflation and he proposes that it would continue to increase in line with inflation after 2006.
This harmonisation of excise duty has been in the pipeline for some time and most countries have been unhappy with the idea for one reason or another.
While every member state must agree to it before it could become law, Mr Bolkestein believes he has a strong case for its adoption. He points to the fact that all 15 states signed up to having a single market and agreed to do whatever was necessary to bring this about.
"I would remind countries like Britain that Article 93 of the Treaty also applies to it on harmonisation, and that is completely clear. Harmonisation is an obligation. The Treaty says the Council of Ministers shall, not may, bring this about. The Commission as guardian of the Treaty must see to it that the Treaty is obeyed ," he said.
Mr Bolkestein is due to release details of his plan to tackle the thorny issue of vehicle registration tax tomorrow, which if agreed, would have major implications for Ireland.
The proposal would do away with the Government forcing drivers to pay up to 30% VRT on cars bought outside the country, since they have already paid taxes in the country where they purchased the vehicle. While the Department of Finance is still waiting to see the details, it notes that the exchequer gets about 900 million a year from VRT.
Both attempts to force governments to comply with what they signed up to the single market could end up in court with the Commission pitted against the member state governments.
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