Energy taxation in the EU Wien September 2003 Daniel Boeshertz European Commission DG TAXUD

Today’s discussion General policy context Present Community legislation The energy tax directive: content and state of play

Taxation: general context The main purpose of taxation is to raise revenues EC tax legislation: unanimity of the Council (Article 93 EC) Integration of sustainable development in Community policies

Main drivers in energy taxation Good functioning of the Internal market Sustainable development

Taxation of energy products: current legislation Two directives on mineral oils (1992): –harmonisation of the structures of excise duties –approximation of rates (minimum rates for product / use) –compulsory exemptions, facultative tax reductions, flexible tool for tax differentiation Introduced for internal market reason

The energy tax directive: main lines Community framework for the restructuring of the taxation of energy products All energy sources are concerned (except for peat) Increase in existing minimum rates (mineral oils) and new positive minimum rates for electricity, gas and coal Few compulsory exemptions (international aviation…)

The energy tax directive : main lines (2) Facultative tax differentiation measures for household consumption, renewables, energy intensive companies… Possibility of further tax differentiation - similar to Art 8(4) derogations Specific rules for electricity, natural gas and coal (vs. Directive 92/12)

Competitiveness issues in the compromise Business / non business Processes outside the scope of the Directive Energy intensive companies (EIC) (purchases of energy products and electricity amounts to at least 3.0% of the production value, or national energy tax payable amounts to at least 0.5% of the added value) Voluntary agreements: EIC: 0 rate - non EIC: 50% min rates Consistency with State aid rules

Business use? Rate B Rate A Energy- intensive? Environmental agreement or eq. art. 17 (4) ? Environmental agreement or eq. art. 17 (1) (b) ? Reduced rate (down to zero) art. 17 (2) Reduced rate (down to min.rate) art. 17 (1) Normal business rate Environmental agreement or eq. art. 17 (4) ? Reduced rate (down to 50% of min.rate) art. 17 (3) Reduced rate (down to min. rate) art. 17 (1) yesno yesno yesno yesno yesno

The energy tax directive: state of play Opinion of the EP is required Transposition is to be prepared at national level Entry into force: 1 January 2004 Future Member States: transition periods, if necessary, to be discussed

Conclusion Commission’s policy in indirect taxation : more harmonisation Action is required at EU level (avoid fragmentation, competitiveness...) The global compromise reached on energy tax is positive: –(nearly) all energy products are taxed; minimum rates are increased or set –tax differentiation measures/transition periods give appropriate flexibility Unanimity?