EXPLANATORY MEMORANDUM

1.CONTEXT OF THE PROPOSAL

•Reasons for and objectives of the proposal

Taxation of energy products and electricity in the European Union is governed by Council Directive 2003/96/EC of 27 October 2003 restructuring the Community framework for the taxation of energy products and electricity (the ‘Energy Taxation Directive’ or the ‘Directive’).

Pursuant to Article 19(1) of the Directive, in addition to the provisions laid down 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 in the level of taxation for specific policy considerations.

Sweden is seeking for authorisation to apply a temporary reduction of the national tax rates for petrol, unmarked gas oil and equivalent fuels used as motor fuels, falling below the minimum levels of taxation as laid down in Table A of Annex I to the Directive.

The requested period of validity is limited to 3 months and is within the maximum period allowed by Article 19(2) of the Energy Taxation Directive.

By letter dated 6 May 2022, the Swedish authorities informed the Commission of their intention to apply the temporary measure. Additional information was provided on 19 and 24 May 2022.

According to the Swedish authorities, the aim of the measure is to mitigate the high retail prices of petrol and diesel in the country, resulting from the recent geopolitical developments, and directly affecting both households and companies. They highlighted that Sweden, as a sparsely populated country, has a high proportion of residents that depend on their cars for commuting and other daily trips.

As underlined by the same authorities, the price of petrol has increased by around 2.50 SEK/litre, rising from 19.39 SEK/litre on 24 February 2022 to 21.93 SEK/litre on 16 May 2022. Similarly, for diesel the price has increased by 2.14 SEK/litre, from 21.82 SEK/litre to 23.96 SEK/litre for the same period. A reduction of excise duty of 1.80 SEK/litre was granted during that period. However, for 15 000 kilometres per year and a fuel consumption of 6 litres per 100 kilometres, the monthly fuel expense has increased by around 160-190 SEK/month.

The table below provided by the Swedish authorities, shows fuel prices per litre and the price components for the 25th of each month from January to April 2022 and the price on 20 of May 2022.

The Swedish excise duty was 5.37 SEK/litre for petrol and 3.35 SEK/litre for diesel in May 2022. It comprises an energy tax and a carbon dioxide tax levied at the time of release for consumption. Together they meet the minimum levels of taxation laid down in the Directive.

Sweden requests authorisation to temporarily reduce to zero the energy tax component of the excise duty, while keeping the CO2 tax component for both products in line with the request of its national parliament. Such a reduction of the energy tax component (corresponding to 2.73 SEK/litre for petrol and 1.06 SEK/litre for diesel) would result in tax rates lower than the minimum EU levels of taxation (approximatively 30% below those levels).

According to the Swedish authorities, the excise duty is the only price component on which Sweden can intervene to reduce the retail price in the short term. Hence, in their view, the derogation appears necessary to remedy the current situation Sweden faces.

The tax reduction will be available to all those liable for excise duty on petrol and diesel.

The budgetary expenditure is estimated at SEK 3.5 billion (SEK 2.1 billion deriving from the tax reduction on petrol and SEK 1.4 billion for diesel).