# EUR-Lex - 52013PC0008 - EN

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# 52013PC0008

**Proposal for a COUNCIL DECISION authorising France to apply a reduced rate of taxation to unleaded petrol used as motor fuel and consumed in Corsican departments in accordance with Article 19 of Directive 2003/96/EC /* COM/2013/08 final - 2013/0006 (NLE) */**

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EXPLANATORY MEMORANDUM

1.           CONTEXT OF THE PROPOSAL

The taxation of energy products and
electricity in the EU is governed by Council Directive 2003/96/EC (hereafter
'the Directive'). The Directive specifies which products are taxable, the uses
that make them taxable and the minimum rates at which they must be taxed
depending on whether they are used as motor fuel, for certain industrial or
commercial purposes or for heating.

Pursuant to Article 19(1) of the Directive,
the Council, acting unanimously on a proposal from the Commission, may
authorise any Member State to introduce further exemptions from or reductions
in the rate of excise duties for specific policy considerations.

The objective of this proposal is to permit
France to continue to apply a reduction in the rate of taxation on unleaded
petrol used as motor fuel and consumed in the Corsican departments with a view
to partially offsetting the additional costs induced by geographical remoteness
and difficulties of supply.

The
request and its general context

Council Decision 2007/880/EC of 20 December
2007 authorised France to apply a reduced rate of excise duty to unleaded
petrol used as motor fuel and consumed in the Corsican departments on the
condition that the reduction does not go beyond the additional cost of
transport, storage and distribution compared with mainland France. The objective of this Decision is to permit France to partially
offset the additional costs induced by geographical remoteness and difficulties
of supply. In application of this Decision, France applied a reduction of EUR 1
per hectolitre of unleaded petrol.

By letter dated 12 March 2012, the French
authorities requested an authorisation to continue to apply a reduction of EUR
1 per hectolitre for a period of six years, from 1 January 2013 to
31 December 2018. By letters dated 25 June 2012 and 5 October 2012 France
has submitted additional information concerning the justification of the
request for derogation.

As in the previous requests, the French
authorities argued that the reduction in the rate of excise duty is required to
offset part of the higher price of unleaded petrol ([1])
resulting from the insular nature of Corsica. The higher price is caused by the
additional costs of selling fuel in this region, which is estimated at 7
eurocent per litre. According to the French authorities, several reasons
explain this additional cost:

(1)
Given that there is no
refinery in Corsica, transport and distribution costs are higher for delivery
of fuel there because of the additional costs associated with maritime and road
freight (longer distance and journey time). The
distance from the nearest refinery in Fos-sur-Mer to the two storage warehouses
on Corsica in Luciano and Ajaccio is respectively 358 km (of which 182 km
by sea) and 315 km (of which 170 km by sea). Transport to these
warehouses exclusively takes place by boat, whereas all warehouses situated on
mainland France are all directly linked to a refinery through a network of
pipelines, which considerably reduces transport costs. As an example, costs of
transport to Corsica are four to five times higher than costs for a transport
by pipeline between Le Havre and the region of Paris.

(2)
The much smaller capacity of the two warehouses
in Corsica (respectively 16 000 m3 and 19 000 m3)
requires more frequent supplies to them. Investment in the maintenance,
compliance of facilities and staff costs are not related to business volume of
the depots. The total volume of fuel entered in these depots is less than
400 000 m3 per year, which is half of the average volume
for a depot on the mainland. Hence, the storage cost per m3 is
higher in Corsica.

(3)
The fixed costs borne by distributors must be
absorbed by a lower sales volume because of the low population ([2]), the very mountainous terrain (90 % mountains) and the small volumes of fuel sold by
each service station. The areas of distribution are therefore isolated and far
apart from each other. The number of inhabitants per
service station is 2 485 compared to an average of 5 768 on the
French territory and the sales volume per service
station amounts to 2 278 m3 for Corsica as compared to
4 149 m3 in mainland France.

As illustrated in the table below, the
international petrol price quotations for Corsica and for mainland France are
the same amounting to EUR 64.82 per 100 litres. The difference in the gross
transport costs is very high between mainland France and Corsica, respectively EUR
7.77 per 100 litres and EUR 23.28 per 100 litres. In spite of the lower tax
rates (both energy tax and VAT) the final price for unleaded petrol is higher
in Corsica than in mainland France.
 The table below shows the price structure of petrol
and diesel on 10 August 2012

Average price of a fuel in EUR per 100 litres || Mainland France petrol || Corsica petrol || South Corsica petrol

Price including taxes || 160.07 || 165.00 || 163.51

VAT || 26.23 || 18.98 || 18.81

Energy tax || 61.25 || 57.92 || 57.92

Gross transport and distribution margin || 7.77 || 23.28 || 21.96

International quotations (Hypothese Corse) || 64.82 || 64.82 || 64.82

Source: www.prix- carburants.gouv.fr

France also pointed out that the measure
comes under the specific government policy in favour of development in Corsica,
justified by the handicap of insularity. According to available statistics,
Corsica as a whole has a gross domestic product per capita of EUR 23 800
in 2009, which is considerably lower than the national average of EUR 29 574
in that year.

Provisions in the field covered by the
proposal

Council Directive 2003/96/EC of 27 October
2003 restructuring the Community framework for the taxation of energy products
and electricity.

Council Decision 2011/38/EU of 18 January
2011 authorising France to apply differentiated levels of taxation to motor
fuels in accordance with Article 19 of Directive 2003/96/EC. The
regionalisation of the rates of domestic consumption tax on petroleum products
(TIPP) concerns both diesel and unleaded petrol used as motor fuel. It forms
part of the policy of decentralisation planned by the French authorities
inasmuch as it allows the French regions, including Corsica, to adjust the
rates of excise duty applicable to motor fuels. This decentralisation is part
of an approach designed to increase administrative effectiveness by improving
the quality and reducing the cost of public services. It is also part of a
policy of subsidiarity, allowing for decisions to be adopted in many areas at
the appropriate level (see the second recital to Decision 2011/38/EU) and
therefore pursues objectives other than those sought by the tax reduction
requested. The authorisation expires at the end of 2012, but France has
requested its extension.

Assessment
of the measure under Article 19 of Directive 2003/96/EC

Specific
policy considerations

Article 19(1), first subparagraph, of the
Directive reads as follows:

'In addition to the provisions set out in the
previous Articles, in particular in Articles 5, 15 and 17, the Council, acting
unanimously on a proposal from the Commission, may authorise any Member State
to introduce further exemptions or reductions for specific policy
considerations.'

The tax differentiation places unleaded
petrol consumers in Corsica on a more equal footing with similar consumers on
the mainland by partially offsetting the additional cost borne by consumers in
Corsica. The proposed measure therefore meets certain regional and cohesion
policy objectives.

The tax reduction does not go beyond the
additional costs of transport and distribution borne by consumers in Corsica.
The EUR 10/1 000 l reduction in the cost of unleaded petrol is much
smaller than the difference between the respective final prices.

The reduced
rate of taxation on the consumption of unleaded petrol currently applied in
Corsica (EUR 579.2/1 000 l) ([3])
is still appreciably higher than the minimum EU level set by Directive
2003/96/EC (EUR 359/1 000 l).

Consistency
with the other policies and objectives of the Union

When the Commission examines a request, it
takes into account the proper functioning of the internal market, the need to
ensure fair competition and the implementation of the EU’s health, environment,
energy and transport policies.

The measure is acceptable from the point of
view of the proper functioning of the internal market and of the need to ensure
fair competition. It merely seeks to partially offset the additional costs
associated with Corsica’s island status. In view of the remote and insular
nature of the departments to which it applies and the moderateness of the
reduction in the rate - which is, moreover, very high compared with the EU
minimum - the measure is not expected to lead to changes in fuel consumption,
through the attraction of consumers from outside these areas.

As the effect of the tax relief on
transport is expected to be insignificant, and compensatory policies could be
found for any marginal effects which might occur, the measure is not
incompatible with the health, environment, energy and transport policies of the
union.

Period of application of the measure and
development of the EU framework on Energy Taxation

Article 19(2) of Directive 2003/96/EC lays
down, for this type of measure, a maximum period of six years, with the
possibility of renewal. The Commission suggests that the period of application
is set to the maximum allowed by Directive 2003/96/EC, i.e. six years, taking
into account the absence of any negative impact of the current arrangement on
intra-EU trade and on the general level of taxation of fuels in France, in
order to ensure legal certainty for the region, the Commission suggests at this
stage to grant the authorisation for six years, i.e. from 1 January 2013 until
31 December 2018.

However, in order not to undermine future
general developments of the existing legal framework, it is appropriate to
provide that, should the Council, acting on the basis of Article 113 of the
Treaty, introduce a modified general system for the taxation of energy products
to which the present authorisation would not be adapted, this Decision shall
expire on the day on which those modified rules become applicable.

Should the Council adopt such a new system
and should the Commission consider that the authorisation proposed herewith is
still warranted, it would examine, positively and in a timely manner, any
request from France for a similar authorisation adapted to that new system, so
as to provide for the continuity of the present proposal.

State aid
rules

The measure may constitute State aid in
accordance with Article 107(1) of the TFEU. Since the reduced rates are above
the EU minima, the measure would be covered by Article 25 of Regulation
800/2008/EC ([4])
(the General Block Exemption Regulation) and would thus be considered compatible
with the internal market. However, as the period of validity of the General
Block Exemption Regulation ends on 31 December 2013 any aid inherent in the
measure would need to be notified to the Commission under State aid rules, in
case the Commission would not have adopted a new Regulation comparable to the
General Block Exemption Regulation or in case such new Regulation would not
contain a rule equivalent to the one present in Article 25.

The decision is without prejudice to the
applicable State aid rules during the period covered by the derogation.

2.           RESULTS OF CONSULTATIONS
WITH THE INTERESTED PARTIES AND IMPACT ASSESSMENTS

Consultation of interested parties

The proposal consists of a tax reduction
which concerns only France.

Obtaining and using expertise

No external expertise has been used.

Impact assessment

No impact assessment has been carried.

Summary of the measure proposed

The Commission proposes to authorise the
tax reduction of EUR 10 per 1 000 l until 31 December 2018, thereby
permitting France to apply a reduced rate of taxation to unleaded petrol used
as motor fuel and consumed in the Corsican departments.

Legal basis

Article 19 of Council Directive 2003/96/EC.

Principle of subsidiarity

The field of indirect taxation covered by
Article 113 of the TFEU is not in itself within the exclusive competence of the
EU within the meaning of Article 3 of the Treaty.

However, the exercise by Member States of
their concurrent competences in this field is strictly circumscribed and
limited by the measures harmonising national laws already adopted by the
Council.

As it happens, pursuant to Article 19 of
Directive 2003/96/EC, only the Council is empowered to authorise a Member State
to introduce further exemptions or reductions within the meaning of that
provision. Member States cannot substitute themselves for the Council.

The proposal therefore respects the
principle of subsidiarity.

Principle of proportionality

The proposal respects the principle of
proportionality. The EUR 0.01/l reduction in the cost of unleaded petrol is
well below the additional cost borne (EUR 0.10 per litre).

Choice of instruments

Instrument proposed: Council decision.

Article 19 of Directive 2003/96 makes
provision for this type of measure only.

3.           BUDGETARY IMPLICATION

The measure does not impose any financial
and administrative burden on the Union, The proposal therefore has no impact on
the Union budget.

4.           OPTIONAL ELEMENTS

None.

2013/0006 (NLE)

Proposal for a

COUNCIL DECISION

authorising France to apply a reduced rate
of taxation to unleaded petrol used as motor fuel and consumed in Corsican
departments in accordance with Article 19 of Directive 2003/96/EC

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the
Functioning of the European Union,

Having regard to Council Directive
2003/96/EC of 27 October 2003 restructuring the Community framework for the
taxation of energy products and electricity ([5]), and in particular Article
19(1) thereof,

Having regard to the proposal from the
European Commission,

Whereas:

(1)       By Council Decision
2007/880/EC ([6])
France was authorised to apply a reduced rate of taxation to unleaded petrol
used as motor fuel and consumed in Corsican departments in accordance with
Article 19 of Directive 2003/96/EC.

(2)       By letter dated 12 March
2012, France requested authorisation to apply a reduced rate of energy tax to
unleaded petrol used as motor fuel by way of extension of a practice followed
under Decision 2007/880/EC. The reduction amounts to 1 EUR per hectolitre. The
authorisation is being requested for the period from 1 January 2013 to 31
December 2018. In Corsica the cost of supplying unleaded petrol to the
forecourt is appreciably higher than in mainland France, final prices being 0,10
EUR per litre higher than on the mainland.

(3)       By reducing the tax on
unleaded petrol borne by consumers in Corsica, the consumers concerned will be
placed on a more equal footing with those on the mainland. The measure
therefore meets regional and cohesion policy objectives.

(4)       The tax reduction is no
larger than what is necessary to allow for the additional transport and
distribution costs borne by consumers in Corsica.

(5)       The final level of
taxation complies with the minimum rates laid down in Directive 2003/96/EC -
currently 359 EUR /1 000 l (or 35,90 EUR /hl). This holds true even
allowing for an authorisation analogous to the one granted by Council Implementing
Decision 2011/38/EU of 18 January 2011 authorising France to apply
differentiated levels of taxation to motor fuels in accordance with Article 19
of Directive 2003/96/EC ([7]),
for the period as from 1 January 2013, in case the effects of such decision are
combined with those of this Decision.

(6)       In view of the remote and
insular nature of the departments to which it applies and the moderateness of
the reduction in the rate - which is, moreover, very high compared with the
minimum level prescribed by Directive 2003/96/EC - the measure requested will
not give rise to any movement specifically linked to the supplying of fuel.

(7)       Consequently, the measure
is acceptable from the point of view of the proper functioning of the internal
market and of the need to ensure fair competition and it is not incompatible
with the health, environment, energy and transport policies of the Union.

(8)       France should therefore be
authorised, pursuant to Article 19(2) of Directive 2003/96/EC, to apply a
reduced rate of taxation to unleaded petrol used as motor fuel and consumed in
Corsica, and this until 31 December 2018.

(9)       It follows from Article
19(2) of Directive 2003/96/EC that each authorisation granted under that
Article must be strictly limited in time.

(10)     In order to provide the
regions concerned with a sufficient degree of certainty, the authorisation should
be granted for a period of six years. However, in order not to undermine future
general developments of the existing legal framework, it is appropriate to
provide that, should the Council, acting on the basis of Article 113 of the
Treaty, introduce a modified general system for the taxation of energy products
to which this authorisation would not be adapted, this Decision expires on the
day on which the rules on that modified system become applicable.

(11)     It should be ensured that France
can apply the specific reduction to which this Decision relates seamlessly
following on from the situation existing before 1 January 2013, under Decision
2007/880/EC. The authorisation requested should therefore be granted with
effect from 1 January 2013.

(12)     This Decision is without
prejudice to the application of the Union rules regarding State aid,

HAS ADOPTED THIS DECISION:

Article 1

France is authorised to apply a reduction
in the rate of taxation not exceeding 1 EUR per hectolitre to unleaded petrol
used as motor fuel and consumed in the Corsican departments

In order to avoid any over-compensation,
the reduction shall not go beyond the additional costs of transport, storage
and distribution compared with mainland France.

The reduced rate shall comply with the obligations
in Directive 2003/96/EC, in particular the minimum rates referred to in Article
7 thereof.

Article 2

This Decision shall apply from 1 January
2013 and shall expire on 31 December 2018.

However, should the Council, acting on the
basis of Article 113 of the Treaty, introduce a modified general system for the
taxation of energy products to which the authorisation granted in Article 1 of
this Decision would not be adapted, this Decision shall expire on the day on
which the rules on that modified system become applicable.

Article 3

This Decision is addressed to the French
Republic.

Done at Brussels,

For
the Council

The
President

([1])            The
pump price of unleaded petrol (SSP 95) in Corsica on 22 May 2012 was EUR 1.66
per litre compared to an average price of EUR 1.56 per litre on the French
territory.

([2])            The
number of inhabitants is 35/km2 in Corsica compared to 94/km2
in mainland France.

([3])            This
rate takes into account the reduction applied by Corsica in application of
Council Decision 2011/38/EU of 17 January 2011.

([4])            Commission
Regulation (EC) No 800/2008/EC of 6 August 2008 declaring certain categories of
aid compatible with the common market in application of Articles 87 and 88 of
the Treaty, OJ L 214, 9.8.2008,
p. 3.

([5])            OJ
L 283, 31.10.2003, p. 51.

([6])            OJ L 346, 29.12.2007, p. 15.

([7])            OJ
L 19, 22.1.2011, p. 13.