REPORT FROM THE COMMISSION TO THE COUNCIL AND THE EUROPEAN PARLIAMENT under Article 8(6) of Council Directive 92/81/EEC, on the situation with regard to the exemptions or reductions for specific policy considerations as set out in Article 8(4) of Directive 92/81 and concerning the obligatory exemption of mineral oils used as fuel for the purpose of air navigation other than private pleasure flying and the exemptions or reductions possible for navigation on inland waterways other than for private pleasure craft as set out in Articles 8 (1) (b) and 8 (2) (b) of the same Directive
Date: 1996-11-14
Institutions: European Commission
Subjects: derogation from EU law, excise duty, mineral oil, tax exemption, tax harmonisation

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels,  14.11.1996 
COM(96) 549  final 

96/0263 (CNS) 

REPORT FROM THE COMMISSION  TO THE  COUNCIL 
AND THE EUROPEAN  PARLIAMENT 

under Article  8(6) of  Council Directive  92/81/EEC, 
on the  situation  with regard  to the  exemptions or reductions for  specific 
policy  considerations  as set out in Article  8(4) of Directive  92/81 
and 
concerning  the  obligatory  exemption  of mineral  oils used as fuel  for  the 
purpose  of air navigation  other than private pleasure flying  and  the 
exemptions  or reductions possible for  navigation  on 
inland  waterways other than for  private pleasure  craft 
as set out in Articles  8(l)(b)  and  8(2)(b) of the same  Directive 

Proposal  for  a 

COUNCIL  DECISION 

authorising Member  States to continue to apply to  certain  mineral  oils, when used  for 
specific  purposes,  existing  reduced  rates  of  excise  duty  or  exemptions  from  excise 
duty,  in  accordance  with  the  procedure  provided  for  in  Article  8(4)  of  Directive 
92/81/EEC 

(presented  by  the  Commission) 

a 

Commission report to the Council and the European Parliament 
under Article 8(6) of Council Directive 92/81/EEC, 
on the situation  with regard to the exemptions or reductions for specific 
policy considerations as set out in Article 8(4) of Directive 92/81 
and 

concerning the obligatory exemption of mineral oils used as fuel for the 
purpose of air navigation other than private pleasure flying and the 
exemptions or reductions possible for  navigation on 
inland waterways other than for ptivate pleasure craft 
as set out in Articles 8(1)(b) and 8(2) (b) of the same Directive. 

TABLE OF CONTENTS 

1. 

THE  COMMUNITY  EXCISE SYSTEM  FOR TAXATION OF 
MINERAL OILS AND SCOPE OF THE REVIEW 

2. 

REVIEW OF THE EXEMPTIONS GRANTED TO AVIATION  FUEL 

3. 

4. 

REVIEW OF THE REDUCTIONS OR EXEMPTIONS GRANTED TO 
FUEL CONSUMED  BY SOME MEANS OF SEA TRANSPORT 

REVIEW OF THE DEROGATIONS GRANTED FOR 
INDUSTRIAL  AND COMMERCIAL  REASONS 

5. 

REVIEW OF THE DEROGATIONS GRANTED FOR 
ENVIRONMENTAL  REASONS 

6. 

7. 

8. 

REVIEW OF THE DEROGATIONS GRANTED FOR 
REGIONAL  POLICY REASONS 

REVIEW OF THE DEROGATIONS GRANTED FOR 
OTHER POLICY REASONS 

REVIEW OF THE FUNCTIONING  OF THE ARTICLE  8(4) 
PROCEDURE 

REVIEW  OF THE  EXEMPTIONS  OR REDUCTIONS  AUTHORISED  UNDER 
ARTICLE 8(4)  OF COUNCIL  DIRECTIVE  92/81/EEC  AND THE  EXEMPTIONS  OR  REDUCTIONS 

APPLIED  UNDER  ARTICLES  8(1)(B)  AND 8(2)(B)  OF THE SAME  DIRECTIVE 

1. 

SCOPE AND OBJECTIVE  OF THE  REVIEW 

The Community Excise system for taxation of mineral oils 

1.1  Council  Directive 92/81/EEC1  which  came into force on  1/1/93 as  part of  a package of 
measures  necessary  for  the  abolition  of  fiscal  controls  at  intra-Community  frontiers 
defines  the  products  which  are  to  be  regarded  as  mineral  oils  for  the  purposes  of 
Community Excise Duty provisions. Member States are required,  in accordance with the 
provisions  of  this  Directive,  to  apply  excise  duty  to  a  specified  range  of  mineral  oil 
products.  They  are free  to  decide the  rate of  duty  they  wish  to  apply  to  each  product 
and,  in  certain  cases,  for  different  uses  of  each  product,  provided  that  they  respect  the 
minimum  rates  laid  down  in Council  Directive 92/82/EEC2.  Moreover,  although  there 
is  provision  in  the  Directive  for  the  application  of  different  rates  of  duty  on  different 
uses  of  specific  products,  this  does  not  extend  to  the  application  of  different  rates  for 
different  grades  of  the  same  product.  In  such  cases,  a derogation  under  Article  8(4) of 
Directive 92/81/EEC  is necessary. 

1.2  The products concerned  and existing Community  minimum rates are as follows: 

PRODUCTS 

Petrol 

leaded 
unleaded 

Gas  Oil 

used  as propellant 
used  for  industrial  and  other  uses* 
used  as heating  fuel 

LPG  and  Methane  (1000  kg) 
used  as propellant 
used  for  industrial  and  other  uses 
used  as heating  fuel 

Heavy  Fuel  Oil  (1000  kg) 

Kerosene 

used  as propellant 
used  for  industrial  and  other  uses* 
used  as heatinc  fuel 

ECU  PER 
1000 LITRES 

337 
287 

245 
18 
18 

100 
36 
0 

13 

245 
18 
0 

Council  Directive  92/81/EEC  of  19 October  1992  on  the  harmonisation  of the structures  of  excise 
duties on mineral  oils  (OJ  n° L316,  31/10/92). 
Council  Directive  92/82/EEC  of  19 October  1992 on  the approximation  of the  rates  of excise  duty  on 
mineral  oils  (OJ  n° L316,  31/10/92). 
This  covers  mineral  oils used  in: 
a) 
b) 
c) 

stationary  motors; 
plant  and  machinery  used  in construction, civil  engineering  and  public  works;  and 
vehicles  intended  for  off-road  use or which  have  not  been  authorised  for  use on  the  public 
highway. 

1.3  Any  other  product  used  as  a  motor  fuel  must  be  taxed  at  the  same  rate  as  the 
equivalent  fuel  listed  above.  Any  other  hydrocarbon,  (except  for  coal,  lignite,  peat 
or  similar  solid  hydrocarbons  or  natural  gas)  which  is  used  for  heating  purposes, 
must be taxed  at the rate for the equivalent  mineral oil. 

Exemptions and  reductions 

1.4  Under Article 8(1) of Directive 92/81,  Member  States are required  to exempt mineral 

oils from  the harmonised  excise duty when they are : 

a)  used  for  purposes other than as motor  fuels  or as heating  fuels; 
b) 

supplied  for  use  as  fuels  for  the  purpose  of  air  navigation  other  than  private 
pleasure  flying; 
supplied  for  use as fuel  for  the purposes  of  navigation  within  Community  waters 
(including  fishing),  other than  in private pleasure  craft; 
injected  into blast furnaces  for  reduction  purposes. 

c) 

d) 

1.5  Article  8(2)  of  Directive  92/81  gives  Member  States  the  option  to  apply  total  or 

partial exemptions or reductions on mineral oils when used: 

a) 
b) 
c) 
d) 

e) 

f) 

g) 

in the process of producing electricity  and  in combined  power and heat plants; 
for  navigation on  inland waterways other than for  private pleasure  craft; 
in the field  of passenger transport,  and the carriage of goods by rail; 
in  the  field  of  pilot  projects  for  the  technological  development  of  more 
environmentally-friendly  products  and  in  particular  in  relation  to  fuels  from 
renewable  resources; 
in the field  of the  manufacture,  development,  testing  and  maintenance  of  aircraft 
and ships; 
exclusively  in  agricultural  and  in  horticultural  works  and  in  forestry  and  inland 
fisheries; 
in respect of dredging  operations  in navigable waterways  and  in ports. 

1.6 

In  addition  to  the  above  compulsory  and  optional  reduced  rates  and  exemptions, 
Member  States  may  apply  to  the  Council  for  authorisation  to  introduce  further 
exemptions  or  reduced  rates  "for  specific  policy  considerations"  under  a  procedure 
laid down  in Article  8(4) of  Council  Directive  92/81.  This  provision  was  introduced 
to  enable  Member  States  to  maintain  a  number  of  minor  exemptions  and  reduced 
rates  which  they  had  applied  prior  to  1 January  1993  and  which  did  not  affect  the 
proper  functioning  of  the  Internal  Market. 
It  also  permitted  them  to  subsequently 
introduce  new  exemptions  or  reduced  rates  designed  to  achieve  certain  National 
policy  objectives.  The  requirement  to  seek  Council  authorisation  was  clearly 
necessary  in order to permit the Commission  and other  Member  States to evaluate the 
possible  effects  of  such  measures  and  to  object  to  them  if  they  considered  that  they 
were likely to give rise to distortion  of  competition  or were  not compatible with  other 
principles of the Internal  Market. 

1.7  On  19 October  1992  the  Council  took  its  first  decision3  granting  all  Member  States 
individual  and  specific  derogations,  thus  easing  the  introduction  of  the  Common 
system  on  1  January  1993.  A  second  decision  was  taken  on  13  December  1993, 
concerning  requests  from  Belgium,  Luxembourg,  Greece,  Italy  and  Portugal.4  A 
third  formal  decision  was  taken  on  22  December  1995,  involving  requests  from 
Belgium,  Luxembourg,  Denmark,  Italy,  Austria,  Portugal  and  Finland.5  A  fourth 
formal  decision was taken on 22  April  1996,  involving  requests  from  Italy,  Austria, 
Sweden  and  the  United  Kingdom.6  A  fifth  formal  decision  was  taken  on  27 June 
1996 on a request from  Ireland.7  In addition,  since  neither the Commission nor any 
national  administration  requested  that certain  requests  be  considered  formally  by the 
Council,  some  decisions  have  been  taken  tacitly.  These  decisions  have  not  been 
published.  They concern requests from  Ireland, the UK,  France,  Germany,  Portugal 
and Spain to be allowed to exempt waste oils used for heating purposes; from Italy to 
be  allowed  to  apply  reduced  rates to  mineral  oils  consumed  in the  regions  of  Udine 
and  Trieste;  and  from  France  to  be  allowed  to  apply  reduced  rates  to  mineral  oils 
consumed on the Island of Corsica.  Furthermore,  Austria,  Finland  and Sweden were 
granted certain derogations  at the time of  their  accession  to the Community.  These 
are  set  out  in their  Act  of  Accession.8  Further  requests  from  Sweden,  France and 
Greece  are  also  currently  being  processed.  A  full  list  of  all  authorisations  granted 
under the procedure is set out in Annex A. 

The review  requirements 

1.8 

In order to enable the Commission  and the Member States to continue to monitor the 
compatibility  of  the various  derogations  granted  under the provisions  of  Article  8(4) 
with  the  requirements  of  the  Internal  Market,  Article  8(6)  requires  the  Council  to 
review,  before  31  December  1996,  "the situation  with regard  to  the  exemptions or 
reductions set  out in paragraph  (4) on the basis  of a  report by  the  Commission  and 
[to] unanimously determine on a proposal from  the  Commission, after consultation  of 
the European Parliament,  whether any or all of them shall be abolished, modified or 
extended.  " 

This  document  constitutes  the  report  which  the  Commission  is  required  to  make 
under this Article. 

1.9 

In addition,  no  later than  31  December  1997,  the  Council  is  required  to  review  the 
obligatory  exemption  for mineral oils  supplied  for  use as fuels  for the purpose of air 
navigation  other  than  private  pleasure  flying  provided  for  in  Article  8(l)(b)  of 
Directive  92/81  as well  as the optional  exemptions  or  reduced  rates  permitted  under 
Article  8(2)(b)  for  mineral  oils  which  are used  under fiscal  control  for  navigation on 
inland waterways other than in private pleasure craft.  This review must take place on 

3 
4 
5 
6 
7 
8 

Council Decision 92/510/EEC of  19 October  1992, OJ L316 of 31.10.92. 
Council Decision 93/697/EC of 13 December  1993. OJ L321 of 23.12.93. 
Council Decision 95/585/EC of 22 December  1995. OJ L327 of 30.12.95. 
Council Decision 96/273/EC of 22 April  1996. OJ L102 of 24.04.96. 
Council decision 96/418/EC of 27 June  1996. OJ LI72 of  11  07.96. 
Annex IX, Chapter XV fiscalily OJ C241 (p 335) of 29.08.1994. 

the basis of  a report  by  the  Commission  and  must  take  account  of  the  external  costs 
entailed  in such  means of transport  and  the  implications  for  the environment,  and the 
Council  must  decide  unanimously,  on  a  proposal  from  the  Commission  whether  to 
abolish or modify  these exemptions. 

This  review  clause  in  Article  8(7)  only  foresaw  a  review  being  carried  out,  by 
31 December  1997.  However,  given  the  interest  shown  by  Member  States,  the 
Commission  indicated  in  its  first  review  of  the  minimum  rates  of  excise  duty^  its 
willingness  to  look  at  these  specific  exemptions  as  part  of  its  general  review  of 
Article  8(4)  during  the  course  of  1996.  This  document  therefore  constitutes  the 
report which the Commission  is required  to make under  Article 8(7). 

Structure of the review 

1.10  Over  70  derogations  have  now  been  given  under  Article  8(4)  and  for  convenience, 
they  have been  grouped  according  to the  various  policy  areas  in which  they  fall.  In 
some  cases  there  are  several  possible  headings  and  in  these  instances  the  derogation 
has  been  listed  under  what  is  considered  to  be  the  primary  reason  for  the  request. 
The  first  area  is  that  of  Transport to  which  can  be  linked  the  questions  of  air  and 
inland water  navigation.  Air  transport  is dealt  with  in Chapter  2  and  sea and inland 
waterway  transport  in  Chapter  3.  A  second  grouping  is  the  Industrial  and 
Commercial sector dealt with  in Chapter 4.  This  includes exemptions  on fuel  used  in 
alumina  production,  the  production  of  molecular  sieves  and  samples  taken  for 
analysis.  The  third  group  is  the  Environmental  policy area,  covered  in Chapter  5, 
which  is  becoming  more  and  more  important.  Member  States  who  want  to  use  tax 
incentives  in  their  environmental  policy  are  increasingly  applying  for  derogations 
based  on environmental  arguments.  Examples  here  are  the  ability  to  apply  different 
rates to different  environmental  classes  for  diesel  fuel  and  petrol,  exemptions  for  the 
use of waste oils as heating  fuel  and  reduced  rates  of duty  on  fuels  - especially  gases 
-  used  in public transport  vehicles.  The  fourth  category  is  Regional policy,  covered 
in  Chapter  6  where  some  Member  States  have  been  granted  derogations  for  fuel 
consumed  in particular  regions.  The final  area  is Other policy, dealt with  in  Chapter 
7, which covers derogations  such  as those concerned  with the taxation  of fuel  used by 
the  armed  forces  and  Government  agencies  and  social  policy  areas  such  as  reduced 
rates  of  duty  on  fuel  consumed  by  vehicles  used  by  disabled  persons,  fuel  used  in 
lighthouses,  in pumps used  for  drainage of flooded  land  and  in desalination  plants.  A 
breakdown  of derogations by category  is set out  in Annex B. 

1.11  As already  indicated,  it is clear that  in evaluating  the  individual  derogations, the main 
focus  must  be  on  the  criteria  laid  down  in  Article  8(5)  of  the  structures  Directive  : 
compatibility  with  the  Internal  Market,  fair  competition  and  the  protection  of  the 
environment.  However,  given  that  the  derogations  have  also  been  granted  to  fulfil 
other  policy  concerns,  such  as  Transport,  Industrial,  Regional  or  Social,  the  review 
will  also  have  to  consider  the  impact  of  these  derogations  in  other  policy  areas  and 
evaluate  in a number  of  cases whether  a fiscal  incentive provides  the  best  instrument 
for  such purposes. 

Commission  Report,  COM(95) 285 Final  of  13.09.1995. 

1.12  Finally,  the  Commission  considers  that  it  is  necessary  to  examine  the  whole 
procedure  whereby  Member  States  can  apply  for,  and  the  Council  agrees  to, 
derogations from the general  regime.  Chapter 8 of this report therefore  analyses the 
experience to date with the existing system. 

2. 

REVIEW  OF THE  EXEMPTIONS  GRANTED TO AVIATION  FUEL 

2.1  As  already  outlined  in  Chapter  1,  the  Commission  has  undertaken  to  review  the 
compulsory  exemption  for  commercial  aircraft  fuel.  This  chapter  deals  with  this 
obligatory  exemption  as outlined  in  Article  8(l)(b)  of  Council  Directive  92/81/EEC, 
and  also  examines  the  various  national  authorisations  granted  under  Article  8(4)  of 
the  same  Directive  concerning  private  aircraft  fuel. 
In  reviewing  the  exemption 
provision  it is explicitly  stated  in the  review  clause  that  the  review  will  have  to take 
into  account  the  external  costs  entailed 
in  such  means  of  transport  and  the 
implications  for  the environment 

The  obligatory  exemption,  under  article  8(l)(b),  from  the  harmonised  excise 
duty  on  mineral  oils  supplied  for  use  as  fuels  for  the  purpose  of  air  navigation 
other than  private pleasure  flying 

The existing situation 

2.2  There  are two types of aviation  fuel  in current  use. Jet  fuel  (AVTUR  or JET - Al)  is 
used  by  jet  and  turboprop  powered  aircraft  and  powers  the  vast  majority  of 
international  and  intra  Community  flights.  Aviation  gasoline  (AVGAS)  is  used  in 
smaller  piston  engined  aircraft  operated  by  air  taxi  companies  and  in  virtually  all 
private aircraft.  The commercial  use of aviation  fuel  can be divided  into three areas: 

International  flights  involving departure to or  arrival  from  third  countries. 
Intra-Community  flights  involving travel between two or  more Member States. 

1) 
2) 
3)  National  flights. 

2.3  Aviation  kerosene  (AVTUR)  is  currently  not  subject  to  taxation.  This  is  largely 
because  of  international  commitments  under  which  all  contracting  parties  to  the 
into  reciprocal 
International  Civil  Aviation  Organisation  (ICAO)  have  entered 
arrangements  to supply  aircraft  fuel  exempt of all taxes.  To be more  specific,  Article 
24 of the Chicago  Convention  on  International  Civil Aviation  of  1944, which  states: 

"Fuel, lubricating oils,  spare parts,  regular equipment and aircraft stores  on board 
on  aircraft  of  a  contracting State,  on  arrival in the territory of  another contracting 
State and retained on board on leaving the territory of that State shall be exempt from 
customs duty,  inspection fees  or similar national or local duties and charges". 

2.4  Although  Article  24  of  the  Chicago  convention  only  deals  with  "goods"  already  on 
board  the  aircraft,  the  ICAO  Council  resolution  of  14  December  1993  (Doc  8632-
C/968)  confirms  that  fuel  embarked  on  aircraft  destined  for  another  State,  shall  also 
be  exempt.  Furthermore,  it  is  made  clear  that  " 
or similar  national or local 
duties  and  charges"  includes  for  example  excise  duties  and  sales  and  consumption 
taxes.  These  resolutions  are  adhered  to  by  all  EU  Member  States  and  are 
implemented  through  several  bilateral  agreements.  All  Member  States  of  the 
European  Union  are  members  of  ICAO,  while  the  European  Community  has  had 
observer  status since  1989. 

2.5 

In the  light of this  international  commitment  and  also taking  into account the problem 
of  competition  between  Community  and  third  country  airlines  the  Council,  when 
adopting  a harmonised  structure  for  excise  duties  within  the  Union,  chose to  provide 
a  compulsory  exemption  for  commercial  aircraft  fuel  (Article  8(1 )(b)  of  Council 
Directive 92/81/EEC  of  19 October  1992). 

The competitiveness  of the European  air transport  industry 

2.6  The  air  transport  industry  is  more  exposed  to  third  country  competition  than  any 
other  form  of transport with  the possible exception  of  shipping.  Taxation  of  aviation 
fuel  used  on 
the 
competitiveness  of the European  industry  in relation  to third  country  carriers. 

intra  Community  or 

flights  would 

international 

reduce 

2.7  Fuel  costs  represent  10-15%  of  the  operating  costs  of  European  carriers.  The  Air 
Transport  Association  of  America  has  calculated  the  costs  of  the  discontinuation  of 
the jet  fuel  waiver  in the  United  States1^.  The  supplementary  cost  for  the  American 
air  carriers  would  be  in  the  range  of  500  million  dollars  annually  in  addition  to  the 
negative effects  on airline  industry  employment.  The overall  effects  would  be  similar 
for  the European  industry,  the  level  of  cost  obviously  depending  on  the  level  of  tax. 
If  tax  were  to  be  levied  in  the  European  Union  at  the  same  rate  as  that  agreed  (but 
waived)  for  jet  fuel  in  the  United  States,  the  cost  for  the  European  air  transport 
industry  would  be  in  excess  of  250  million  ECU  per  year.  This  would  clearly 
constitute  a  substantial  burden  for  any  industry  faced  with  fierce 
international 
competition. 

Transport and  Environment 

2.8  As previously  stated,  the  Council  decided  in  1992 that  the  review  of  mandatory  duty 
exemptions  for  fuel  consumed  in commercial  aviation  and  navigation  should  be based 
on  the  external  costs  of  such  modes  of  transport  and 
their  environmental 
implications.  Both  aspects  are  discussed  here  as  a  number  of  policy  developments 
have taken place since then: 

In  its  conclusions  on  transport  and  the  environment  of  16  December  1994,  the 
Council  considered  that  excluding  commercial  air  traffic  from  indirect  taxation 
cannot  be justified  on  environmental  grounds  and  called  on  the  Commission  to 
take this into account  in reviewing the tax exemptions  concerned. 

The  Fifth  Environmental  Action  Programme  (COM(92)23  final,  27.3.1992) 
stated  that  "prices  should  reflect  the full  cost  to  society  of  production  and 
consumption,  including the  environmental cost. " (Chapter  7.4).  In  its  proposal 
for  a  European  Parliament  and  Council  Decision  on  the  review  of  the  Action 
Programme  (COM(95)647  final,  24.1.1996),  the  Commission  proposed  to 
develop  "measures  to  achieve  a  greater  internalisation  of  external  costs  in 
transport prices " 

10  The United  States  has established a fuel  lax of 4.3 cents/gallon  for  national  carriers but  has  recently 

waived  its application. 

10 

Similarly,  the  policy  paper  on transportation  presented  by  Italy  on  behalf  of  the 
EU  to  the  ad  hoc  group  on  the  Berlin  Mandate  under  the  UN  Framework 
Convention  on Climate Change proposed  to explore the feasibility  on  introducing 
aviation  fuel  taxation  in the  ICAO framework.  At their  meeting  in  Paris on  19 -
20  February  1996,  the  OECD  Environment  Ministers  "urged the International 
Civil Aviation  Organisation (ICAO) and  other  competent bodies  to  explore the 
feasibility  of  introducing different regulatory  or fiscal  measures,  including  air 
fuel  taxation and efficiency standards; " 

2.9  Action  is  needed  as  emissions  from  aircraft  represent  an  increasing  proportion  of 
Community  production  of  several  major  pollutants.  A  number  of  studies  have 
indicated  that the rapid  growth  in air transport  is  likely  to  lead  to  a doubling  of  CO2 
emissions  from  this  source by 2005 compared  with  1993.  This trend  undermines  the 
achievement of the Community's  objectives  for  stabilising CO2 emissions  by the year 
2000 at  1990 levels and  reducing them  thereafter. 

External  costs 

2.10  The Commission  has adopted  the Green  Paper  "Towards  Fair  and  Efficient  Pricing  in 
Transport"  (COM(95)691  final,  20.12.1995).  The  Green  Paper  states  that  the 
uncertainty  surrounding  external  cost  estimates  does  not  invalidate  the  need  to  make 
changes  where  appropriate  as  the  direction  and  order  of  magnitude  of  the  required 
changes  is  known. 
In  this  respect,  the  figures  advanced  by  the  Green  Paper  are 
relevant  for  this  review,  not  only  in  relation  tc  their  overall  size,  but  also  on  the 
hierarchy  they  establish  between different  transport  modes. 

2.11  Based  on  these  orders  of  magnitude,  it  is  worth  noting  that,  although  aviation  is 
responsible  for  6%  of  the  overall  cost,  which  is  relatively  minor  compared  to  road 
transport,  15.6%  of  the  external  cost  of  air  pollution  in  the  EU  is  attributable  to 
aircraft.  In comparison,  the absolute  figures  for  waterborne  transport  are negligible. 

2.12  Given  the  environmental  impact  of  aviation  activities,  the  mandatory  exemption 
applied  to  mineral  oils  used  in  aviation  (Article  8(1 )(b))  should  ideally  be  abolished. 
However,  the  practical  impact  of  such  an  initiative  taken  solely  at  a  national  or 
Community  level cannot  be  ignored: 

Community carriers  would find  themselves at  a  competitive disadvantage  vis à 
vis third country carriers by having to pay,  higher prices for  their fuel; 

there  would be  a  risk of  third  countries acting  as  "gas stations " for  European 
carriers,  implying  that  large  amounts  of  untaxed fuel  would  be  burned  over 
European  airspace  in  addition to  the problem  of  a  higher fuel  burn  and  extra 
kilometres flown  in order to  carry the untaxed fuel.  This would depend  on the 
level of duty  charged as  the  extra costs of diversion would need to  be balanced 
against the possible savings but certain carriers could be put  at a disadvantage if 
they did not have ready access to untaxed fuel  outside the Union. 

11 

costs for  consumers would rise,  since any increase in fuel  prices  will invariably 
be passed  on by carriers; 

2.13  Besides  the  problem  of  competition  with  carriers  from  third  countries,  the 
compulsory  tax  exemption  has  so  far  helped  to  prevent  distortion  of  competition 
between  carriers  inside  the  Community.  A  unilateral  removal  would  risk  creating 
distortions if a common tax-level  was not agreed. 

Conclusion 

2.14  The  Commission  concludes  that a clause should  be included  in  Article 8(1)(b)  of 
Council  Directive  92/81/EEC  which  would  require  the  Council  to  extend  excise 
duties  on  mineral  oil  to  aviation  kerosene  as  soon  as  the  international  legal 
situation  allows the Community  to levy such a tax on all carriers  including  those 
from  third countries.  This  proposal  would strengthen  the Community's  position 
for  a  corresponding  initiative  in  the  framework  of  ICAO.  This  conclusion  will 
be acted upon  when the Commission  puts forward  proposals  later this year for a 
legal  framework  for  the  taxation  of  energy  products.  At  the  same  time  the 
Commission  will  examine  the  possibility  of  amending  the  wording  of  the 
exemption  to give Member  States the option  to levy  tax on fuel  used  for  national 
flights  pending the abolition  of the exemption. 

The various  national  exemptions  on aviation  fuel  used  in  private  pleasure  flying, 
granted unfler  Article 8(4) of  Council  Directive  92/81/EEC 

Existing exemptions  or reductions 

2.15  Virtually  all  aviation  fuel  used  in  private  pleasure  flying 

is  aviation  gasoline 
(AVGAS).  Article  8.1(b) provides  for  an obligatory  exemption  from  the  harmonised 
excise duty on mineral oils supplied  for  use as fuel^  for  the purposes  of air  navigation 
other  than  private  pleasure  flying.  Council  Decision  92/510/EEC  of  19  October 
1992  allows  Belgium,  Denmark,  France,  Italy,  Ireland,  Portugal,  and  the  United 
Kingdom  to  apply  reductions  or  exemptions  from  the  harmonised  excise  duty  on 
mineral  oils,  to  fuel  used  in  private  pleasure  flying.  Council  Decision  96/273/EEC 
of 22 April  1996 gives  Sweden  the  same  power  and  the treaty  of  Accession  provides 
Finland with  the  same  derogation.  Only  the  Swedish  derogation  is explicitly  limited 
in time  until  the  end  of  1996.  Therefore,  a total  of  9  out  of  the  15  Member  States 
have been authorised  to apply  reduced  rates or exemptions  from  duty  on aviation  fuel 
when  used  for  private  flying. 
In  practice,  Ireland  and  the  United  Kingdom  apply  a 
reduced rate, while the other  seven  Member  States apply  a total  exemption. 

2.16  The key  issue  for  transport  policy,  next to the  internalisation  of external  costs,  is the 
creation  of  a  level  playing  field  across  transport  modes.  When  the  these  are  not 
priced  at  their  full  costs,  serious  distortions  in  the  transport  sector  can  occur, 
resulting  in  substantial  welfare  losses.  Although  not  raising  major  competition 
concerns and  limited  in size, the exemption  of fuel  for  private  pleasure  flying  violates 
the goal of efficient  pricing. 

12 

2.17  The role of the EU  in this  field  is  important,  as the  impact of efficient  pricing  in one 
country  can  have  substantial  effects  on transport  allocation  in other  countries,  due to 
increased  international  integration.  If one country  gives  preferential  treatment  to one 
likewise. 
mode  of 
Conceivably,  reduced  excise  duty  rates  on  fuels  for  some  modes  of  transport  could 
be justified,  depending  on  the  extent  to  which  they  already  cover  their  infrastructure 
costs through  other  fees  and charges. 

transport,  neighbouring  countries  may  be  forced 

to  do 

Conclusion 

2.18  Many  of  the  environmental  arguments  relating  to  commercial  aviation,  also 
apply  to  private  pleasure 
flying.  Although  several  Member  States  have 
expressed  reservations  concerning  the  administrative  complications  of  removing 
the  exemption  for  private  flying,  other  administrations  already  operate  this 
policy  without  major  problems.  To  be  consistent  in  its  transport,  environment 
and  taxation  policy,  the  Commission  concludes  that  the  exemptions  granted 
should  be abolished. 

3. 

REVIEW  OF  THE  REDUCTIONS  OU  EXEMPTIONS  GRANTED  TO  FUEL  CONSUMED  FOR 
SOME MEANS OF WATERBORNE TRANSPORT 

Exemption  or reductions  of excise duty  of fuel  used  in commercial  navigation  on 
inland waterways  (Article 8(2)(b) of Directive  92/81/EEC) 

13 

The existing  situation 

3.1  Article  8(l)(c)  of Council  92/81/EEC  requires  Member  States  to exempt  from  excise 
duty  mineral oils used  as fuel  by commercial  vessels  in Community  waters,  including 
fishing  vessels.  Article  8(2)  also  allows  Member  States  to exempt,  wholly  or  partly, 
such  oils  used  as  fuel  in  commercial  navigation  on  inland  waterways.  The  revision 
clause  in  Article  8(7)  of  the  Directive  only  provides  for  a  review  of  commercial 
navigation  on inland waterways  and not the obligatory  exemption  in Article 8(l)(c). 

3.2  The expression  "Community  waters" covers the territorial  waters of the  15 Member 
States,  namely  the  sea  zone  up  to  12  miles  from  the  baseline  of  the  coast,  and 
including  the  "internal  waters"  of  each  Member  State,  that  is  to  say  the  sea  areas 
largely  surrounded  by  land,  and  ports.  The seas outside territorial  water  are the high 
seas.  "Inland  waterways"  includes  lakes and rivers. 

3.3  At  present  Austria  (on  the  river  Danube  and  lake  Constance),  Belgium,  Denmark, 
Spain,  Italy,  Luxembourg,  Finland,  the  Netherlands,  Germany  and  Sweden  exempt 
fuel  used  in  commercial  navigation  on  inland  waterways.  France,  Ireland  and  the 
United  Kingdom give reductions  in the rate of excise duty  while  Greece  and  Portugal 
give no exemption or reductions  in the rate of duty  for this specific use. 

Transport  externalities 

3.4 

transport. 

incurred  by  road 

Inland  navigation  has  extremely  low  external  costs;  the  external  costs  of  accidents 
and  noise,  for  example,  are  virtually  nil,  whilst  air  pollution  costs  are  greatly  below 
those 
inland  waterway  network  also  has 
The 
considerable  spare  capacity  and  can  therefore  play  a  role  in  diverting  traffic  away 
from  congested  parts  of  the road  networks.  For  these  reasons,  encouraging  a modal 
shift  away  from  road  transport  to  more  environmentally  friendly  modes,  such  as 
inland  navigation  forms  part  of  Community  transport  policy.  The  aim  was  outlined 
in  the  Commission's  White  Paper  "The  future  Development  of  the  Common 
Transport  Policy"  which  was  published  in  1992  and  the  issue  of  external  costs  is 
analysed  in  depth  in  the  Commission's  recently  published  Green  Paper  "Towards 
Fair and  Efficient  Pricing  in Transport". 

3.5  The  Green  Paper  presents  an  overview  of  the  mounting  evidence  which  shows  that 
present  trends  in transport  are  unsustainable  and  examines  various  policy  options  for 
internalising  the  large  external  costs  of  road  transport  in  order  to  arrive  at  a 
sustainable  and  more  efficient  transport  system.  This,  however,  is  a  long-term  aim. 
Until  the  policies  and  technologies  are  in  place  which  would  allow  the  true  costs  of 
road  transport  to  be  internalised,  there  is  a  need  to  ensure  that  environmentally-
friendly  modes of transport  are not disadvantaged. 

14 

3.6  Furthermore,  since certain waterways  are used  by vessels  also engaged  in navigation 
in  Community  waters,  inland  navigation  should  be  put  on  the  same  footing  as  all 
other  commercial  shipping 
in  respect  of  excise  duty.  Another  element  for 
consideration  is that inland navigation fuel  on the Rhine,  by virtue of  a special Rhine 
Regulation  of  1954,  is  already  exempt  from  excise  duty.  In  economic  terms,  the 
Rhine  is by  far  the  most  important  waterway  in  Europe,  and  it  would  therefore  be 
logical to harmonise the rules on other waterways with those currently  in force on the 
Rhine. 

3.7  With  regard  to  the  optional  exemption  for  the  carriage  of  goods  and  passengers  by 
rail  (Article  8(2)(c)  of  Council  Directive  92/81/EEC),  the  above  mentioned 
arguments concerning  external  costs are equally  applicable.  As  such the question of 
the  exemption  for  rail  services  should  be  considered  in  the  overall  context  of 
Directive  92/81/EEC  when  the  Commission  puts  forward  proposals  for  a  new 
general  approach  to the taxation  of  energy  products.  From  information  available to 
the  Commission;  Belgium,  Denmark,  Spain  and  Luxembourg  exempt  certain  fuel 
types  from  excise  duty  when  used  in rail  transport.  Austria,  Finland,  France,  Italy, 
Ireland,  the  Netherlands  and  the  United  Kingdom  apply  a reduced  rate.  Germany, 
Greece  and  Portugal  do  not  grant  any  exemption  or  reduction  in  the  rate  of  duty. 
Sweden  only  exempts  fuel  used  to  transport  goods  by  rail,  fuel  used  for  passenger 
transport being taxable. 

Conclusion 

3.8  To ensure a level playing field  and to pursue environmental  and  transport  policy 
goals  the  Commission  concludes  that  the  optional  exemption  for 
inland 
waterways  should  be  made  obligatory  as  is  already  the  case  for  maritime 
navigation  in  Community  waters.  This  matter  together  with  the  question  of  the 
exemption  for  rail  services  will  be addressed  by  the  Commission  in  its  proposal 
later this year for a framework  for the taxation  of energy  products. 

Exemption  or reduction  in the rate of  duty on fuel  used in private pleasure  craft 

Existing situation 

3.9  Under  Council  Decision  92/510/EEC  of  19 October  1992  Belgium,  Greece,  Ireland 
and  the  United  Kingdom  have  the  right  to  exempt  from  excise  duty  fuel  used  in 
private  pleasure  craft.  Finland  has  the  same  power  under  the  Accession  Treaty  (OJ 
C241 of 29  August  1994).  Ireland  and the  United  Kingdom  apply  a reduced  rate of 
duty,  while  Greece  limits  the  tax  exemption  to  vessels  not  registered  in  Greece. 
Belgium and Finland apply an exemption. 

3.10  Problems have occurred where private pleasure craft have arrived  in a Member State 
not granting  any exemption carrying  marked  low taxed or exempt fuel.  The fuel had 
been  legally  bunkered  in  a Member  State  applying  a derogation,  but the  fact  that it 
was  marked  led  to  investigations  and  delays.  Furthermore,  the  risk  of  "cross-
border"  shopping  between  taxing  and  non-taxing  Member  States  is  substantial  in 
view of the wide variation  in duty rates. 

15 

Conclusion 

3.11  As  with  private  use  of  aviation  fuel,  concern  has  been  expressed  by  several 
Member  States about the administrative  complications  of  removing  the power  to 
grant  reductions  and  exemptions  in  this  area.  Nevertheless,  to  ensure  the 
functioning  of  the  Internal  Market,  and  since  no  environmental  or  transport 
policy goals support  an exemption  of  this specific  use the Commission  concludes 
that the derogations already granted be cancelled. 

16 

4. 

REVIEW  OF  THE  DEROGATIONS  EXISTING  IN  THE  INDUSTRIAL  AND  COMMERCIAL 
SECTOR 

The existing situation 

4.1  As  mentioned  in  paragraph  1.7  a  number  of  Member  States  have  been  granted 
derogations for specific Industrial and Commercial policy reasons.  These include 
the production  of  alumina  in  Sardinia  and  the  Shannon  area,  samples  taken  for 
analysis, testing or other scientific  purposes,  reduced  rates of duty  for  enterprises 
with a very high consumption  of energy and the production  of molecular sieves in 
Calabria. 

4.2  Council  Decision  92/510/EEC  of  19  October  1992.  gave  Ireland  the  power  to 
continue to exempt from  excise duty mineral oils used as fuel  in the production of 
alumina  in  the Shannon  region.  The Irish  government  requested  this  derogation 
to  assist  an  Industry  in  a  relatively  underdeveloped  area.  The  production  of 
alumina in this area uses heavy fuel  oil as an energy  source, and it was felt  that it 
could  not compete  with  other  countries  industries  having  lower  tax  rates  on  fuel 
oil  and  possibly  also  using  lower  or  non  taxed  natural  gas  or  other  energy 
sources.  No time limitation  was linked  to the Irish  derogation.  Italy  obtained  a 
similar derogation  for  the production  of alumina in Sardinia by Council Decision 
93/697/EEC  of  13 December  1993 until  31 December  1994 for  similar  reasons. 
This  derogation  was  extended  until  31  December  1996  by  Council  Decision 
96/273/EEC of 22 April  1996. 

4.3  Germany  and  the  Netherlands  have  a  derogation  allowing  them  to  exempt  from 
taxation  samples of  mineral  oils intended  for  analysis,  tests on  production  or  for 
other scientific  purposes (Council Decision  92/510/EEC of  19 October  1992).  In 
practice  Germany  applies  a  total  exemption  while  the  Netherlands  does  not 
currently  use  the derogation.  At  present  no  distortion  of  the  functioning  of  the 
Internal  Market  deriving  from  the  application  of  these  derogations  has  been 
identified. 

4.4  Denmark  and  Sweden  have  both  been  given  derogations  which  allows  them  to 
apply a lower taxation  for  fuel  used  in  the industrial  sector.  Denmark  is allowed 
to  apply:  "partial reimbursement  to  the  commercial  sector, provided  that such 
taxes are in conformity  with Community provision and provided that the  amount 
of the tax paid and not reimbursed at all times respects the minimum  rates of duty 
or  monitoring  charge  on  mineral  oils  as  provided for  in  Community law". 
(Council  Decision  92/510/EEC  of  19  October  1992).  Sweden  obtained  in  its 
Accession  Treaty  a  derogation  allowing  it  to  apply;  "a reduced  excise duty rate 

17 

for  mineral oils used for  industrial purposes, on the condition  that such rates are 
at  no  time  set  below  the  minimum  rates  laid  down  in  Council  Directive 
Sweden  has  since  applied  for  an  amendment  to  the  existing 
92/82/EEC. 
derogation  to  allow  it  to apply  both  a  reduced  rate  for  industrial  purposes  and a 
super reduced  rate for heavy energy consuming industry until 31 December 1998. 

4.5  Both  countries  have  introduced  CO2  taxes  which  are  calculated  as  a part  of  the 
overall  excise  duty  on  mineral  oils.  To  avoid  harming  industry  and  its 
competitive position  unnecessarily,  they apply lower rates to industry.  Given that 
Sweden  has  decided  to  increase  its  CO2  tax  and  enlarge  its  scope  it  requires 
further  support  for  heavy  energy  consuming  industry.  A practice already  used in 
Denmark.  The Danish  system  has been  notified  to the Commission  and  the State 
Aid  aspect  examined.  Since  the  exemption  is  available  on  the  basis  of  objective 
criteria  to  all  companies,  regardless  of  sector  or  region  concerned  and  since  the 
authorities  do  not  have  any  discretionary  power  in  the  granting  of  exemptions, 
the scheme can be said to constitute a general measure falling  outside the scope of 
Article  92(1)  of  the  Treaty.  The  new  Swedish  system  has  been  notified  to  the 
Commission  and  is being  examined  by  the Commission  Services  for  its  possible 
State  aid  aspects.  The  two  remaining  countries  in  the  Community  having 
introduced  C02/energy  taxes,  the  Netherlands  (which  caps  the  tax  paid  on  the 
basis of annual consumption  by heavy industrial  consumers) and Finland  have not 
applied  for any derogation  for Industry. 

4.6  The overall  question  of creating  the necessary  flexibility  for  Member States when 
wishing  to introduce environmental  taxes,  such as a C02/energy  tax will  have to 
be considered  within  the framework  of  the Commission  proposals on the taxation 
of energy products which will be submitted  to Council later this year. 

4.7  Council  Decision  95/585/EEC  of  22  December  1995  allows  Italy  to  apply  a 

"reduction  in the excise duty on fuel  oil, for  the production  of steam, and for  gas 
oil,  used in ovens for  drying and activating molecular sieves in Reggio  Calabria. 
In no case can the reduced  rate fall  below ECU 18 per tonne".  This  derogation 
applies  until  31 December  1996.  The  Italian  plant  uses  mineral  oil  in  its 
production  while  similar  plants  in  other  Member  States  use  natural  gas  which 
according  to  the  Italian  authorities  gives  them  a  competitive  advantage.  The 
Italian  authorities  requested  total  exemption,  but examination  by the Commission 
indicated  that  natural gas in,  for  example,  Germany  and  France is also taxed and 
as  such  the  pure  energy  costs  would  be  comparable  if  at  least  the  Community 
minimum  rate  was  maintained.  The  Council  therefore  agreed,  on  a  proposal 
from  the Commission,  to authorise a reduced  rate rather than an exemption. 

18 

4.8  All  the derogations  granted  in  this  area  have  been  examined  by  the  Commission 
from  an  Internal  Market  viewpoint.  In  general,  an  exemption  from  excise  duty 
for  certain  undertakings,  products  or  the  production  of  certain" goods  in  a 
Member  State  constitutes  a  state  aid  within  the  meaning  of  Article  92(1), 
provided  it  is  capable  of  distorting  competition  and  affecting  trade  between 
Member  States.  Article  92  stipulates  that  state  aid  is  incompatible  with  the 
common  market  and  thus  prohibited,  unless  it  is  approved  by  the  Commission 
pursuant  to  one  of  the  exemption  clauses  in  Article  92(2)  or  (3).  In  Article  92 
the  most  important  exemption  clause  covers  regional  aid  and  aid  to  facilitate  the 
development  of  certain  economic  activities,  such  as  aid  to  SMEs  or  aid  for 
environmental  protection. 

4.9 

It is clear,  therefore,  that to the extent the existing  exemptions  from  excise  duties 
constitute state aids,  they can only  be allowed  to continue-if exemption  under one 
of  the relevant clauses in Article 92 is applicable and such exemption  is  subject to 
the  conditions  the  Commission  normally  imposes  to  approve  such  aid. 
In  the 
light of these considerations and on the basis of  the information  available  it  seems 
that  several  of  the  existing  exemptions  give  rise  to  some  concern.  The 
Commission  therefore  proposes  to examine  these derogations  to see whether  they 
are incompatible with the Common Market. 

Conclusions 

4.10  The  Commission  concludes 

that 

the  Italian  derogation 

for  alumina 
production  in  Sardinia  be  extended  until  31  December  1998  subject  to  the 
relevant  Community  minimum  duty  rates  being  respected.  The  Irish 
* derogation  for  alumina  production  in the  Shannon  area  should,  in  principle, 
be  extended  only  until  31  December  1998.  The  Commission  would  therefore 
expect  the  Member  States  concerned  to  notify  the  provisions  in  question 
under  Article  93(3)  of  the  Treaty  in  sufficient  time  so  that  it  can  evaluate 
them  in  accordance  with  the  appropriate  provisions  of  the  Treaty,  including 
Article 92(3). 

4.11  The  Commission  concludes  that  the  German  derogation  allowing  exemption 
from  taxation  for  samples  intended  for  analysis,  fest  or  other  scientific 
purposes  should  be  limited  until  31  December  1998.  The  Commission  will 
monitor  the  competitive  aspects  of  the  derogation  and  before  31  December 
1998  will  submit  proposals  to  the  Council  concerning  the  future  of  the 
derogation.  The  same  derogation  for  the  Netherlands  should  be  abolished 
since  it is not  being  used. 

4.12  The  Commission  concludes  that  the  Danish  and  Swedish  derogations 
allowing  them  to  apply  reduced  rates  of  duty  on  fuel  used  in  the  industrial 
sector should  be limited  until  agreement  is reached  on a common  Community 
framework  for  taxation  of  energy  products  which  should  deal  with  this 
matter at  a  Community  level,  or at the  latest  until  31 December  1998. 

19 

4.13  The  Commission  concludes  that  the  derogation  allowing  Italy  to  apply 
reductions  in the excise duty on fuel  oil used in the production  of steam and 
for gas oil used in ovens for drying and activating molecular sieves in Reggio 
Calabria  should  be  extended  until  31  December  1998.  The  rates  applied 
must  respect  Community  minimum  rates.  The  Commission  will  evaluate  in 
detail  this  derogation  to  which  similar  considerations  apply  as those  set  out 
in para 4.10. 

20 

5. 

REVIEW  OF  THE  DEROGATIONS  EXISTING  IN THE  ENVIRONMENTAL  SECTOR 

The existing situation 

5.1  As  set  out  in  paragraph  1.7,  all  Member  States  have  been  granted  derogations  for 
specific  environmental  policy  reasons.  This  heading  covers  a  wide  variety  of 
derogations  which  may  also overlap  with  ether  policy  areas  but they  have been  listed 
under  the  environmental  category  as  this  appears  to  be  the  major  motivating  factor. 
There can be no doubt that this sector will have an increased  importance  in any  future 
requests.  Member  States  have  in  some  cases  felt  that  the  existing  Directives 
regulating  the taxation  of  mineral  oil products  were too  restrictive  when  they  wanted 
to  adopt  cost  effective  measures  to  achieve  environmental  policy  objectives.  Article 
8(4) has, to  date,  been  the only  route  for  such  initiatives.  For  example the ability  to 
apply  differential  tax  rates  to  different  environmental  categories  of  fuel  products  has 
been given to several  Member States. 

5.2  Derogations  covered  in this  chapter  include those  given  to the  burning  of  waste  oils, 
to  LPG,  natural  gas  and  methane  when  used  for  Commercial  or  Industrial  purposes 
and  as  motor  fuels  for  public  transport,  to  motor  and  heating  fuels  of  different 
environmental  categories  and  the use  of  waste  hydrocarbon  gases  as  heating  fuel.  It 
is also worth  mentioning  that several of the decisions  concerning the burning of waste 
oil have been taken  tacitly  under  the procedure  laid  down  in Article  8(4).  This  being 
the case, these decisions have not yet been  published. 

Public transport 

5.3  Austria,  Belgium,  Denmark,  Greece,  Spain,  Italy,  Ireland,  Luxembourg,  Portugal 
and the  United  Kingdom  have all obtained  derogations  allowing them to exempt  from 
excise duty  fuel  used  in local  public transport.  The Austrian  and  Spanish  derogations 
are limited  to LPG and the Luxembourg  and  Portuguese to  LPG,  methane  and  natural 
gas.  As  in  other  areas,  the  exemptions  are  applied  differently 
in  the  different 
Member  States.  From  information  available  to  the  Commission,  Denmark  limits  its 
exemption  to  certain  fuel  products,  Belgium,  Italy  and  Ireland  only  allow  the 
application  of  a  reduced  rate,  while  Greece  and  Luxembourg  do  not  apply  the 
derogation.  The  United  Kingdom  does  not  apply  the  derogation  as  a  direct  duty 
adjustment,  the  reimbursement  being  made by way  of  a grant  based  on the amount of 
excise duty  paid  on fuel  consumed. 

5.4  There  is  mounting  evidence  which  shows  that  the  present  growth  trends  in  transport 
are  unsustainable.  To  make  public  transport  more  attractive  by  lowering  fuel  costs 
could  contribute  to  developing  a  more  sustainable  more  efficient  and  less  polluting 
transport  system.  The  pollution  will  of  course  depend  on  the  fuel  used  in  the 
different  means  of  transport.  However  seen  from  a  pure  economic  angle,  when 
various transport  modes  are  not priced  at their  full  cost,  serious  misallocations  in the 
transport  sector  and  substantial  welfare  losses  can  be the  consequence.  Therefore  the 
tax exemptions applied  could  be said  to violate the goal of efficient  pricing. 

21 

Conclusions 

5.5  The  Commission  concludes  that  the  derogations  granted  in  respect  of  public 
transport  be  maintained  until  a general  rule  is  introduced  as  part  of  a  common 
Community  framework  for  the taxation  of  energy  products  or  at the  latest  until 
31 December  1998. 

General  exemptions  or  reductions  in  the  rate  of  duty  to  be  applied  to  LPG. 
Natural Gas and Methane 

5.6  Council Directive 92/82/EEC  of  19 October  1992 on the rates of duty  on mineral  oils 
sets, among others,  a tax rate on LPG and  methane.  Natural  gas as such  falls  outside 
the  scope  of  the  Directive.  However,  if  natural  gas  is used  as  a  motor  fuel,  Article 
2(3)  of  the  structures  Directive  requires  that  it  shall  be  taxed  at  the  rate  for  the 
equivalent product,  i.e.  LPG. 

5.7  Austria,  Belgium,  Greece,  Finland,  Italy,  Ireland,  Luxembourg,  the  Netherlands  and 
the  United  Kingdom  have  all  obtained  derogations  allowing  them  to  exempt  LPG, 
natural  gas  and/or  methane  from  excise  duty.  Austria  has  a  derogation  until  31 
December  1996 for  natural  gas  and  methane  only,  while  Finland  has  it  for  LPG  and 
methane.  For  Italy,  Ireland  and  the  United  Kingdom  the  derogation  is  limited  to  use 
as  a  motor  fuel.  From  the  information  available  to  the  Commission,  Belgium  only 
applies  a reduced  rate  in  the  Commercial  and  Industrial  sector.  So  does  Greece  but 
only  for  LPG  and  methane. 
Ireland  applies  a  reduced  rate.  Italy  in  practice  only 
exempts  methane,  Luxembourg  exempts  natural  gas  used  as  a  road  fuel  while  a 
reduced  rate  is  applied  to  LPG  and  methane.  The  United  Kingdom  applies  an 
exemption  to  all  gases  for  off-road  motor  use  while  the  Netherlands  exempts  natural 
gas  and  applies  lower  rates  to  LPG  and  methane.  The general  impression  is that  the 
derogations  obtained  are only used  in a limited  way by the individual  Member  States. 

5.8  Viewed  from  an energy  policy  angle  it appears that the application  of exemptions  and 
reductions on,  for  example,  LPG creates a distortion  vis-à-vis other  fuel  types.  From 
an  Internal  Market  view  point,  if  the  derogation  is  used  to  promote  national 
production,  the competition  aspect cannot be  ignored. 

5.9  Europe  is currently  devoting  a great  deal  of  effort  to the development  and  promotion 
of natural  gas  vehicles.  The  arguments  in  favour  of this  fuel  revolve  around  the  fact 
that  it  produces  less  pollution  and  is  an  indigenous  alternative  to  gasoline  which  is 
largely  imported. 
In  an  initial  phase  there  could  be  a  need  for  Member  States  to 
apply  a lower  rate for  natural  gas when used  as fuel.  As already  mentioned  earlier  in 
this  chapter,  the  general  rule  is that  natural  gas  when  used  as  a  fuel  will  have  to  be 
taxed  at the  same rate  as that  applied  to  LPG.  As such,  if a tax-preference  should  be 
given  to this  cleaner  fuel  a derogation  is required.  The  possibility  of  the  addition  of 
an  optional  reduced  rate  for  gases  used  as  a  public  transport  fuel  to  the  existing 
provisions  of  Article  8(3)  of  Directive'92/81  will  be  considered  as  part  of  the 
Commission  review  of  the  taxation  of  energy  products  as  will  the  possibility  of  a 
reduction  in the rate of duty  on natural gas when used  as a fuel  in private vehicles. 

22 

Conclusions 

5.10  The  Commission  concludes  that  the  derogations  granted  in  respect  of  the  use of 
gases  be  maintained  until  a  general  rule 
is  introduced  as  part  of  the 
Commission's  proposals  for  the  taxation  of energy  products  or  at  the  latest  until 
31  December  1998.  The  Commission  will  monitor 
the  competitive  and 
environmental  aspects  of  these  derogations  and  will  submit  proposals  to  the 
Council concerning  their  future  by the end  of  1998. 

Exemption  for  excise  duty  on  waste  oils  or  waste  hydrocarbon  gases  which  are 
re-used  as  heating  fuel,  either  directly  after  recovery,  or  following  a  recycling 
process in  the case of waste oils. 

5.11  A number  of Member  States have secured  derogations  allowing them to exempt  from 
duty  waste  oil  used  for  heating  whether  subjected  to  a  purification  process  or  not. 
Such use is taxable under  Directive 92/81.  However,  according to Article 6(b) of the 
Structures  Directive  (92/81/EEC),  Member  States  need  not  to  treat  as  production  of 
mineral oils operations  by which the user of a mineral  oil  makes  its re-use possible in 
his own undertaking.  At present  Austria,  Germany,  Spain,  Finland,  France,  Ireland, 
Portugal  and  the  United  Kingdom  apply  a duty  exemption  for  waste  oils  used  either 
directly  after  recovery  or  following  a recycling  process.  The  reasoning  behind  these 
requests  was  a  desire  to  prevent  the  dumping  of  used  oils  into  landfill  sites  or 
waterways.  The  quality  of  heating  fuel  produced  from  these  waste  oils  by  simple 
heating  or  filtration  processes  is  generally,  poor  and  the  product  would  not  be 
competitive without  some form  of tax advantage. 

The  requests  from  Germany,  Spain,  France,  Ireland,  the  United  Kingdom  and 
Portugal  were  all  agreed  tacitly,  in  1994.  The  Austrian  and  Finish  requests  were 
both  agreed  in  Council  Decision  95/585/EEC  of  22  December  1995.  Decision 
95/585/EEC  is limited  until the end of  1996. 

5.12  The disposal  of waste oil  is regulated  by Council  Directive  75/439/EEC,  Article  3(1) 
of  which  states  that  "...Member  States  shall  take  the  measures  necessary  to  give 
priority to the processing of waste oils by regeneration".  The various derogations  for 
waste  oils  used  as  heating  fuels  could  be  seen  as  being  contrary  to  the  thrust  of  that 
Directive as they encourage  combustion  rather than  regeneration. 

5.13  The  individual  derogation  requests  were  not  detailed  and  did  not  specify  which 
methods  of  recycling  were  to  be  approved. 
In  practice  the  Member  States  charge 
duty  on  recycled  oil  that  is  used  as  a  motor  fuel  and  only  apply  the  derogation  to 
waste oil that  is used  as a heating  fuel.  In most cases,  relief  is only  applied  to  simple 
recycling  processes  involving  dewatering  the oil  and  filtering  out  solid  contaminants. 
At  present  methods  such  as  vacuum  distillation  exist,  effectively  creating  new  oil 
which  could  be  used  as  a  relatively  clean  heating  or  motor  fuel  or  reused  as 
lubricating  oil,  but  in  practice  only  non  dutiable  lubricants  are  likely  to  be  produced 
from  this  process  as  other  uses  would  lead  to  taxation. 
In  addition,  irrespective  of 
environmental  concerns,  the  advantages  of  regeneration  in terms  of  improved  energy 
security  and  reduced  use of fresh  products  should  not be ignored. 

23 

5.14  The  consequences  of  this  duty  exemption  are  already  visible.  Markets  and 
undertakings  linked to regeneration  of used  oils are declining  because  of diversion of 
the raw materials  essential  to  their  activities.  The  regeneration  industry  consists  of 
some  one  hundred  companies,  most  of  which  are  SME's.  Economic  constraints 
make this activity  barely  profitable  without  public support.  For those  Member States 
where  data  is  available  it  can  be  inferred  that  the  application  of  the  duty  exemption 
will  probably  phase  out  regeneration.  For  instance,  in  Italy,  which  is  not applying 
the exemption,  regenerated  oil  amounts  to  84.6%  of  oil  collected,  while only  13.3% 
is burned.  By contrast,  in the  United  Kingdom  and  Spain,  the  quantities  regenerated 
are  minor  or  negligible.  Similarly,  in  France  (40.1%)  and  Germany  (65.2%),  the 
amount of oil burned has increased  dramatically. 

5.15  Exempting  re-use  in  own  undertakings  recognises  the  fact  that  duty  is  difficult  to 
collect  in such  situations.  This  is certainly  not  the  case  where  used  oil  is  subject  to 
collection  and  sale.  Indeed,  the  waste  oil  Directive  requires  operators  collecting  or 
burning  used  oil  to  be duly  registered,  with  a  record  kept  of  their  transactions.  It  is 
argued that  if combustion  of used oil was taxed,  such  oil  might  be discharged  into the 
environment,  causing  substantial  pollution.  Deposit  or  discharge  of  used  oil  into 
surface,  ground,  inland  sea  water,  drainage  systems  and  soil  is  prohibited  by  the 
Directive  and  any  person  or  undertaking  found  to  be  involved  in  such  action  would 
face  legal proceedings. 

5.16  Waste  oil  recycled  in  the  most  technically  advanced  way  is  less  environmentally 
harmful  and,  in  addition,  will  contribute.to  the  preservation  of  non  renewable  fossil 
fuels.  The  Commission  Services  are  presently  examining  the  main  obstacles 
hindering  the development  of  regeneration  as evidence  already  available  suggests that 
factors  other  than  fiscal  considerations  are  also  involved.  Nevertheless,  it  is  clear 
that derogations  applied  in a way  where  they  are  seen  to  contradict  the  provisions  of 
the waste oil Directive  should  be  reconsidered. 

5.17  Germany  and  Italy  have  a derogation  allowing  them  to  exempt  from  taxation  the  use 
of  waste  hydrocarbon  gases  as  fuel  (Council  Decision  92/510/EEC  of  19  October 
1992).  In  practice  Germany  applies  a total  exemption  while  Italy,  at  present,  does 
not  apply  the  derogation.  Sweden  has  provision  for  an  exemption  in  respect  of 
biologically  produced  methane  and  other  waste  gases,  which  was  agreed  as  part  of 
the  Treaty  of  Accession.  At  present  no  distortion  of  the  functioning  of  the  Internal 
In 
Market,  deriving  from  the  application  of  these  derogations  has  been  identified. 
addition,  the use of waste gases  for  heating  purposes  can  be  seen  as  environmentally 
advantageous. 

Conclusions 

5.18  The  Commission  concludes  that  the  existing  derogations  relating  to  duty 
reductions  or  exemptions  on  waste  oil  and  gases  should  be  limited  to  31 
December  1998.  The  Austrian  and  Finnish  derogations  should  be  extended  to 
the  same  date.  The  Swedish  derogation  allowing  them  to  exempt  from  excise 
duty  biologically  produced  methane  and  other  waste  gases,  should  be limited  to 
the same  date.  By 31 December  1998,  the  Commission  will  submit  proposals  to 
the  Council  suggesting  which  methods  of  recycling  should  qualify  for  exemption 
and the derogations shall  then  be amended  accordingly. 

24 

Reduction  in  the  rate  on  heavy  fuel  oil  with  a  lower  sulphur  content  to 
encourage the use of more environmentally friendly  fuel 

5.19  Council  decision  93/697/EEC  of  13  December  1993  allowed  Belgium  and 
Luxembourg  "to  apply a reduction in the rate of duty on heavy fuel  oil to encourage 
the  use  of  more  environmentally friendly fuels  provided  that  such  an  incentive  is 
specifically linked to sulphur  content and provided that the weighted average of duty 
charged on  heavy fuel  oil  respects  the minimum rate  of  duty  on  heavy fuel  oils  as 
provided for  in  Community  law; in no case can the reduced rate fall  below ECU  6,5 
per  tonne"  until  31  December  1994.  After  some  opposition  in  Council  this 
derogation was prolonged until  31  December  1996 by  Council  Decision  95/585/EEC 
of  22  December.  From  both  an  energy  and  environmental  view  point  it  was 
important  that  the  derogation  should  only  apply  until  the  entry  into  force  of 
Community  arrangements  for  taxation  of  low-sulphur  heavy  fuel  oil  and* competing 
products. 

5.20  The  first  Commission  report  on  excise  duty  rates  (COM(95)285  final  of  13 
September  1995)  states that the  specific  requirement  to review  the treatment  of heavy 
fuel oil by  reference  to sulphur  content  should  be covered  in the overall  review of the 
treatment  of  heating  fuels,  following  a  consultation  process.  This  process  is  now 
intended  to  culminate  in  the  Commission's  new  approach  to  taxation  of  energy 
products. 

Conclusion 

5.21  Although,  the  Commission  has  not  yet  come  forward  with  a  proposal  for  a 
Community  arrangement  for  taxation  of  low-sulphur  heavy  fuel  oil  and 
competing  products,  there 
for  extending  the  existing 
is  no  justification 
derogation  applied  to low sulphur  heavy  fuel  oil  by  Luxembourg  and  Belgium in 
its  present  form.  All  derogations  given  in  this  area  to other  Member  States  are 
limited  in  that they  must respect  the Common  Community  minimum  rates.  The 
same  provision  should  be made  in  respect  of  Luxembourg  and  Belgium  as  they 
have  now  had  four  years  to  adapt  to  the  Internal  Market.  The  Commission 
concludes  that  the  derogation  should  be  extended  on  the  condition  that  the 
common  minimum  rates  are  respected  and  until  such  time  as  agreement  is 
reached  on  a  common  Community  framework  for  the  taxation  of  energy 
products,  including  arrangements  for  taxation  of  low sulphur  heavy  fuel  oil  and 
competing  products  or at the latest until 31  December  1998. 

Reduction  in  the  rate of  duty  on  diesel  fuel  and  heating  gas  oil  to  encourage  the 
use of more environmentally  friendly  fuels 

5.22  Under  Council  Decision  92/510/EEC  of  19 October  1992,  Denmark  and  Greece  are 
allowed  to  "apply a  reduction in the rate of duty on diesel to  encourage the  use of 
more  environment  friendly  fiiels  provided  that  such  incentives  are  linked  to 
established  technical  characteristics  including  specific  gravity,  sulphur  content, 
distillation point,  cetane number and index and provided that such  rates at all times 
respect  the  minimum  rates  of  duty  on  mineral oils  as  provided for  in Community 

law".  From  information  available  to the  Commission  the  provision  is  not  applied  in 
Greece.  In Denmark  however  three classifications  exist;  Normal  Diesel,  Light Diesel 
and  Ultra  Light  Diesel.  Normal  diesel  is taxed  at the highest  rate.  Ultra  light diesel 
is taxed  as  light diesel,  except  when  used  in  local  passenger  transport  vehicles  where 
the tax  is reimbursed  under the relevant derogation. 

25 

5.23  In the Accession  Treaty,  Finland  obtained  a derogation  to apply  " reduced excise duty 
rates  on  diesel fuel  and  gas  oil".  The  rate  applied  may  at  no  time  be  below  the 
minimum  rates  laid  down  in  Council  Directive  92/82/EEC.  Via  the  same  Accession 
Treaty,  Sweden  obtained  a  derogation  allowing  it  to  apply  "reduced tax  rates  for 
diesel and  light heating oil  in  accordance with environmental classifications ".  It  is 
worth  noting  that  none of  these  derogations  are explicitly  limited  in time.  For  diesel 
and  heating  gas  oil,  Finland  applies  a  normal  rate  and  a  lower  "ecological"  rate. 
Sweden  operates  three environmental  classifications  on  diesel,  class  3 being  the  most 
expensive  (ECU  329 per  1000 litres)  and  class  1, the cheapest  +/-  ECU 50 below the 
rate applied  to class 3.  For heating gas oil Sweden only  applies one rate. 

Conclusions 

5.24  The  Commission  concludes  that  the  derogation  given  to  Greece  allowing  it  to 
apply  lower  rates  on  environmentally  cleaner  diesel,  be  abolished  since  it  is  not 
used.  The  identical  Danish  derogation  should  be  limited  in  time,  as  should  the 
Swedish  and  Finnish  derogations  concerning  diesel  and  light  heating  fuel.  The 
Commission  concludes  that the derogations  should  be extended,  on  the condition 
that  the  common  minimum  rates  are  respected,  until  31  December  1998 or such 
earlier  time  as  agreement  is  reached  on  a  common  Community  framework  for 
the  taxation  of  energy  products.  This  will  include  arrangements  for  taxation  of 
diesel  and  heating  oil  according  to  environmental  classification  and  competing 
products. 

Taxation  of  gasoline according  to environmental  classification 

5.25  Environmental  factors  have  already  been  taken  into  account  within  the  existing 
mineral  oil  tax  framework.  For  example  there  is  different  treatment  of  leaded  and 
unleaded  petrol  where  there  is  an  ECU  50  per  1000  litres  differential  between  the 
minimum  rates  for  these  products.  Furthermore,  Member  States  are  obliged,  under 
Article  4  of  the  rates  Directive  (92/82/EEC),  to  apply  a  lower  rate  of  duty  to 
unleaded  petrol  than  to  leaded  petrol.  At  the  time  the  Directive  was  adopted, 
Member  States  agreed  to  be  guided  by  the  objective  of  maintaining  a  differential  in 
favour  of  unleaded  petrol  of  ECU  50  per  1000  litres,  though  this  differential  is  not 
legally  binding  on  the  Member  States.  There  are  also  parallel  measures  such  as  the 
requirement  for  all  new  cars  to  be  fitted  with  catalytic  converters.  The  tax 
differential  on  leaded  and  unleaded  petrol  has  been  used  as  an  example  of  the  use of 
fiscal  instruments  in transport  and environmental  policy. 

26 

5.26  As  previously  mentioned,  Member  States  must  apply  a  tax  differential  between 
leaded  and  unleaded  petrol.  As  a  result  of  this  policy  and  the  increasing  use  of 
catalyst equipped  cars,  all Member  States  have experienced  a substantial  reduction  in 
the use of  leaded  petrol  and  a increased  use  of  unleaded  grades.  Such  developments 
have effects  on revenue yield  as well as the environment. 

5.27  Recent  experience  within  Member  States  has  indicated  that  new  unleaded  gasoline 
products have been  introduced  into the market.  Some Member  States  feel  that the tax 
should  reflect  the  quality  of  the  product,  whether  that  be  based  on  the  presence  or 
absence of lead  or on different  environmental  criteria.  "Lead  Replacement  Gasoline" 
and  similar  fuels  are  examples  of  new  products  developed  for  use  in  older  cars  not 
fitted  with catalytic converters  and which would  normally  use  leaded  petrol. 

5.28  To  reflect  differing  environmental  categories  and  to  protect  their  revenues,  four 
Member  States  currently  have  the  power  to  apply  differential  rates  on  petrol. 
Council  Decision  96/273/EEC  of  22  April  1996,  allows  Sweden  and  the  United 
Kingdom  to  "apply differential rates  of  tax  on  unleaded petrol  to  reflect  different 
environmental categories provided  that such  rates  at  all  times  respect the  minimum 
rates of duty  on mineral oils  as provided for  in  Community law".  Ireland  has  now 
been  granted  a  similar  facility  under  Council  Decision  96/418/EC  dated  27  June 
1996.  Finland  in  its  Accession  treaty  was  allowed  to  "apply reduced  excise  duty 
rates on  reformulated unleaded and  leaded petrol".  Finland  must  also  respect  the 
minimum  rates.  Furthermore,  all of  them,  are  obliged,  under  Article  4 of  the  Rates 
Directive  (92/82/EEC),  to  apply  a  lower  rate  of  duty  to  unleaded  petrol  than  to 
leaded petrol.  All the derogations  are limited  to 31 December  1996. 

5.29  Sweden  applies  two  rates  on  unleaded  petrol  according  to  its  environmental 
classification.  The  difference  between  the  two  classes  is  ECU  +1-1 per  1000  litres 
(ECU  456  compared  to  ECU  462).  The  United  Kingdom  applies  a  reduced  rate  on 
95  octane  unleaded  petrol,  while  higher  octane  unleaded  gasoline  including  Lead 
Replacement  Gasoline  is  liable  at  an  intermediate  rate  between  the  leaded  and 
unleaded  rates.  Finland  applies a normal  rate and  an  "ecological"  rate on both  leaded 
and unleaded  gasoline.  On  leaded  petrol  the tax differential  is ECU  8 per  1000  litres 
(ECU  532  compared  to  ECU  524)  and  on  unleaded  petrol  the  differential  is  also  8 
per  1000 litres  (ECU 457 compared  to ECU 449). 

5.30  At a Community  level  no explicit  definition  of environmental  categories  has  yet been 
agreed  although  the  Commission  has  recently  put  forward  a  draft  Directive  laying 
down  technical  specifications  on  health  and  environmental  grounds  for  fuels  to  be 
used  in  petrol  and  diesel  vehicles.  These  could  be  used  by  Member  States  as  the 
basis  for  differential  levels  of  taxation  to  encourage,  by  fiscal  means,  the  marketing 
of  cleaner  fuels.  Until  these  are  implemented,  there  is  a  risk  of  distortion  of 
competition  and  fragmentation  of the Internal  Market. 

27 

Conclusions 

5.31  The  Commission  concludes  that  the  derogations  given  to  the  United  Kingdom 
Sweden  and  Ireland  concerning  differentials  on  unleaded  petrol  should  be 
extended.  The  Finnish  derogation  concerning  leaded  and  unleaded  petrol 
should  be  limited  in  time.  The  derogations  may  apply  until  such  time  as 
agreement  is  reached  on  a  common  Community  framework  for  the  taxation  of 
energy  products,  including  arrangements  for  taxation  of  gasoline  according  to 
its  environmental  classification  and  competing  products  or  at  the  latest  until  31 
December  1998. 

Other  types  of environmental  taxes on  fuel 

5.32  Under  Council  Decision  95/585/EEC  of  22  December  1995,  Denmark  may  until 
31 December  1996;  "apply  differential rates of excise duty to petrol  distributed from 
petrol  stations  equipped with a  return system for  petrol fumes  and petrol distributed 
from  other petrol  stations, provided  that such rates at all times respect the minimum 
rates  of  excise duty  on  mineral  oils  as  provided for  under  Community law".  To 
tackle the  same problem  other  Member  States  have  used  other  measures,  such  as  for 
example,  setting  standards on station  equipment  instead  of  using  a tax  incentive.  The 
purpose  behind  the  Danish  request  is  to  provide  an  incentive  for  owners  of  petrol 
stations to  install  return  systems  for  petrol  fumes.  The  initiative  is a part  of  a whole 
limit  the  exhaust  of  volatile  organic  compounds  (VOCs)  to  the 
to 
strategy 
atmosphere. 

Conclusion 

5.33  The  Commission  concludes  that  the  derogation  given  to  Denmark  concerning 
fuel  delivered  from  certain  filling  stations  should  continue  until  such  time  as 
agreement  is  reached  on  a  common  Community  framework  for  the  taxation  of 
energy  products,  including  arrangements  for  taxation  of  gasoline  according  to 
its  environmental  classification  and  competing  products  or  at  the  latest  until 
31 December  1998. 

28 

6. 

REVIEW  OF THE  DEROGATIONS  EXISTING  IN THE  REGIONAL  POLICY  SECTOR 

The existing  situation 

6.1  Three Member  States have applied  for  and  been granted  regional  derogations. 

6.2  Council  Decision  92/510/EEC  allowed  France  to  exempt  mineral  oils  consumed  on 
the  island  of  Corsica  from  excise  duty  until  31  December  1994.  When  the 
derogation  expired,  the  French  administration  put  forward  a new  request  to  prolong 
the derogation  until  31 December  1996.  Since  neither the Commission  nor  any  other 
Member  State  requested  that  the  matter  be  discussed  at  Council  level  within  the 
obligatory  two  month  period,  the  derogation  was  prolonged  tacitly  until  the  end  of 
1996.  In practice  France reimburses  6.63  FF./hi  (Normal  rate on unleaded  petrol  = 
357,23  FF./hi)  when  gasoline  is  put  to  consumption  on  the  island  of  Corsica  or  the 
gasoline  is delivered  on Corsica to private pleasure  craft. 

6.3  Council  decision  92/510/EEC  allows  Italy  to  exempt  mineral  oils  consumed  in  the 
regions  of  Val  d'Aosta  and  Gorzia  from  excise  duty. 
In  practice  the  Italian 
administration  limits the exemption  by  imposing  an annual  quota.  The  same  decision 
also  allowed  Italy  to  exempt  mineral  oils  consumed  in  the  regions  of  Udine  and 
Trieste  from  excise  duty  until  31  December  1994.  This  is  also  limited  by  an  annual 
quota.  When  the  derogation  expired,  the  Italian  administration  put  forward  a  new 
request  to  extend  the  derogation  until  31  December  1998.  Since  neither  the 
Commission  nor  any  other  Member  State  requested  that  the  matter  be  discussed  at 
Council  level  within  the  obligatory  two  month  period  the  derogation  was  extended 
tacitly  until  the end  of  1998. 

6.4  Recently  the  Italian  administration  has  identified  a threat to their  mineral  oils  revenue 
from  the  importation  of  low  taxed  fuel  from  Slovenia.  To  reduce  the  problem  the 
Italian  authorities  submitted  a  request  for  a  derogation  allowing  them  to  apply 
reductions  in  the  rate  of  duty  on  gasoline  delivered  in  the  Region  of  Friuli-Venezia 
Giulia.  The  derogation  was  granted  until  31  December  1996  in  Council  decision 
96/273/EEC  of 22 April  1996. 

6.5  Council  decision  95/585/EC  allows  Portugal  to  apply  reductions  in the  rate  of  excise 
duty  on  fuel  oil  consumed  in  the  autonomous  region  of  Madeira  until  31  December 
1996.  This  reduction  may  not  be  greater  than  the  additional  costs  incurred  in 
transporting  the fuel  to that region. 

29 

Competition  aspects 

6.6  As  already  mentioned,  as  a  general  principle  an  exemption  from  excise  duty  for 
certain  undertakings,  products  or  the  production  of  certain  goods  in  a Member  State 
constitutes  a state aid within  the  meaning  of  Article  92(1)  of the treaty,  provided  that 
it  is  capable  of  distorting  competition  and  affecting  trade  between  Member  States. 
Article  92  stipulates  that  state  aid  is  incompatible  with  the  common  market  and  thus 
prohibited,  unless  it  may  be  approved  by  the  Commission  pursuant  to  one  of  the 
exemption  clauses  in  Article  92(2)  or  (3).  In  Article  92  one  of  the  most  important 
exemption  clauses  is regional  aid. 

6.7  The existing  derogations  do  not  require  that  the  Member  States  involved  respect  the 
community  minimum  rates.  Although,  some  of  the  regions  dealt  with  here  are 
eligible for  receipt  of  support  from  structural  funds,  there  seems  to be  little evidence 
that the economy  would  suffer  significantly  if the regions  in question  were  allowed  to 
apply  reduced  rates  that  respected  the Community  minimum  rates.  From  an  Internal 
Market viewpoint and considering  that the derogations  have existed  for  some years,  it 
seems reasonable  that  they  should  be  amended  to  require  Community  minimum  rates 
to be observed. 

Conclusion 

6.8  The  Commission  concludes  that  these  derogations  should  be  extended  or  limited 
in  time  to  31  December  1998  provided  they  respect  the  Community  minimum 
rates.  The  Commission  will  then  review  the  existing  regional  derogations  and 
submit  proposals  to the  Council  concerning  their  future  by 31 December  1998. 

30 

7. 

DEROGATIONS  GRANTED  FOR  OTHER  POLICY  REASONS 

The existing situation 

7.1  There are a number  of other  derogations  involving  a variety  of  policy  reasons,  many 

of which have social origins. 

7.2  Greece and  the  Netherlands  have derogations  allowing  them  to  exempt  from  taxation 
the use of fuel  in respect of desalination  plants.  (Council  Decision  92/510/EEC  of  19 
October  1992).  In practice  both  Member  States  apply  total  exemptions.  At  present 
no distortion  of the functioning  of the  Internal  Market,  deriving  from  the  application 
of these derogations has been  identified. 

7.3  Greece  has  a derogation  allowing  them  to  exempt  fuel  used  in  vehicles  belonging  to 
the  President,  the  National  Police  Force  and  the  Metropolitan  Bishop  from  excise 
duty.  Within  certain  quantitative  restrictions  taxis  in  France  are  allowed  tax-free 
fuel.  Ambulances  in  Italy  only  have  to  pay  a  reduced  excise  duty  on  fuel.  The 
armed  forces  in  Greece,  Italy  and  the  Netherlands  are  exempt  from  excise  duty. 
Lighthouses  in Ireland  and the  United  Kingdom  are exempt  from  tax on  fuel.  Fuel in 
motor vehicles used  by the disabled  in Ireland  is exempt  (in practice within  an annual 
quota).  Fuel  used  in  pumps  to  drain  flooded  land  in  Belgium,  Italy  and  the 
Netherlands  is exempt. 

7.4  Council  decision  92/510/EEC,  allows  France,  in  the  framework  of  certain  policies 
aimed  at  assisting  areas  suffering  from  depopulation,  to  exempt  mineral  oil  products 
from  excise duty.  In practice  France  reimburses  the excise  duty  on  motor  fuels  used 
for  commercial  purposes  by  companies  registered  in  a commune  with  less than  3000 
inhabitants  and  where  part  of  the  turnover  comes  from  retail  business.  The  annual 
consumption  per enterprise  must be within  an annual  ceiling of  1500 litres. 

7.5 

It  seems  difficult  to  justify  some  of  these  derogations  on  pure  economic  grounds. 
Most  could  be  more  efficiently  replaced  by  other  means  of  support  which  would  be 
more  transparent  and  simpler  to  administer.  Areas  such  as  Government  vehicles, 
It 
ambulances,  national  forces  and  lighthouses  appear  to  fall  within  this  category. 
could,  also,  be argued  that the principle  should  be that  Governments  are only  entitled 
to  the  same  exemptions  as  other  sectors.  Moreover,  although  in  most  areas  any 
budgetary  impact  will  be  minimal,  as  the  Government  both  pays  and  receives  the 
revenue,  there  is,  nevertheless  a  risk,  that  derogations  lead  to  an  inefficient  use  of 
resources  because  they  send  the  wrong  price  signals  to  those  agencies  that  consume 
the  fuels. 

31 

Conclusions 

7.6  The  Commission  concludes  that  the  derogation  allowing  Greece  and  the 
Netherlands  to  exempt  the  use  of  fuel  in  desalination  plants  from  taxation 
should  be  limited  until  31  December  1998.  The  Commission  will  monitor  the 
competitive  aspects  of  the  derogations  and  will  submit  proposals  to  the  Council 
concerning  the future  of these derogations  by the end of  1998. 

7.7  The Commission  concludes  that the remaining  derogations  in this  area should  be 

abolished. 

32 

8. 

REVIEW OF THE FUNCTIONING  OF THE ARTICLE 8(4)  PROCEDURE 

The existing  situation 

8.1 

In  the  vast  majority  of  cases  the  Council  has  given  its  explicit  decision  on  the 
requests  put  forward  by  various  Member  States.  However,  in  accordance  with 
Article  8(4)  of  Directive  92/81/EEC  the  Council  is  deemed  to  have  authorised  the 
exemptions  or reductions  proposed  if within  two  months  of  the other  Member States 
being  informed  neither the Commission  nor  any  Member  State  has  requested  that the 
matter  be  considered  by  the  Council.  Since  no  Member  State  nor  the  Commission 
requested  that  the  matter  be  raised  within  the  two  month  period  the  following 
requests are considered  to have been adopted  from  the following  dates: 

1.  For  reductions  in  or  exemptions  from  excise  duty  for  waste  oils  which  are  re 
used  as  fuel,  either  directly  after  recovery  or  following  a  recycling  process  for 
waste oils, and where the re-use  is subject  to duty: 

in Ireland  from  16 November  1993; 
in the  United  Kingdom  of  Great  Britain  and  Northern  Ireland  from  25  April 
1994; 
in the French  Republic  from  8 June  1994; 
in the  Federal  Republic of Germany  from  8 June  1994; 
in the  Portuguese  Republic  from  8 June  1994; 
in the Kingdom  of Spain  from  15 August  1994. 

2.  For  mineral  oils  consumed  in  the  regions  of  Udine  and  Trieste  in  the  Italian 

Republic  from  1  January  1995 for  a period  of 4 years. 

3.  For  reductions  in excise  duty  rates  on petrol  consumed  on  the  island  of  Corsica 

in the  French  Republic  from  23 February  1995 until  31 December  1996. 

Concerns 

8.2  These  tacit  or  implicit  decisions  create  serious  legal  problems. 

In  particular  there 
may  be  a  lack  of  discussion  and  justification  and  it  is  impossible  to  publish  an 
unwritten  act.  One  way  of  avoiding  this  would  be  to  require  a  proper  and  explicit 
decision  of  the  Council  on  a  proposal  of  the  Commission  before  any  exemption  or 
reduction  of  excise  duties  is  granted.  This  would,  however,  mean  that  the  Council 
would  have  to  consider  a considerable  number  of  individual  requests.  This  leads  to 
consideration  of  how  the  decision  making  process  could  be  improved  without-
damaging  the  principle  of transparency.  One  possibility  is to grant  the  Commission, 
assisted  by the Member  States  in the  form  of the Committee  established  under  Article 
24  of  Council  Directive  92/12/EEC,  (and  which  takes  decisions  on  the  basis  of 
majority  voting  as  laid  down  in  Article  148(2)  of  the  Treaty),  the  power  to  approve 
requests  for  a strictly  limited  period. 

The  Council  could  then  be  asked  periodically  to  decide  whether  such  authorisation 
should be abolished,  modified  or extended  in time. 

8.3  To  aid  the  Commission  and  Member  States  to  evaluate  derogations,  moreover, 
Member States should  always assess  as accurately  as possible,  in the notification  sent 
to the Commission,  the expected  impact of the measures they  intend to apply. 

33 

Conclusions 

8.4  The  Commission  recognises  the  need  for  Member  States  to  continue  to  have  the 
ability,  for  very  specific  policy  considerations,  to  obtain  derogations  from  the 
general  excise regime.  Such  derogations  in the form  of exemptions  or  reductions 
in  the  rates  of  excise  duty  should  only  be  considered,  however,  when  Member 
States  have  provided  the  Commission  with  sufficient  background  material 
including  an  evaluation  of  the  consequences  of  such  exemptions  or  reductions. 
The Commission  will then  examine  the requests  in the light of  the functioning  of 
the Internal  Market,  fair competition  and environmental  protection  policies. 

8.5  Future  derogations  should  always  be  limited  in  time  and  subject  to  regular 
review.  To  ensure  that  the  system  can  operate  smoothly,  individual  requests 
received from  Member States should be dealt with according  to the  procedure as 
outlined  in  Article 24 of  Council  Directive  92/12/EEC  of 25 February  1992.  The 
Council  should  then  review  every  three  years,  all  derogations  which  have  been 
granted  on  the  basis  of  a  report  by  the  Commission  and  shall  unanimously 
determine  on  a  proposal  from  the  Commission  after  consultation  of  the 
European  Parliament,  whether  any  or  all  of  them  shall  be  abolished,  modified 
or extended  for a further  period. 

8.6  The  Commission  will  make  proposals  to amend  Article 8 of  Directive  92/81/EEC 
to enable this new approach  to operate.  The proposals  will  be put forward  as an 
integrated  part  of  the  new  general  approach  to  the  taxation  of  energy  products 
before  the end of  1996. 

34 

ANNEXA 

AUTHORISATIONS GRANTED AND REQUESTS MADE UNDER ARTICLE $.4 OF 

DIRECTIVE 92/31/EEC 

35 

DECISION 
TAKEN  AT 
COUNCIL 

ACT  OF 
ACCESSION 
JO  C 241 du 
29/8/94 

Article  1.4  of 
Council  Decision 
95/585/EC  of 22 
December  1995 

Article  1.2  of 
Council  Decision 
96/273/ECof22 
April  1996 

REQUEST 

DECISION 
PROPOSAL 

NO  DECISION 
TAKEN  AT 
COUNCIL 

&  exemption  from  excise  duty  for  LPG 
local  public 

fuel 

in 

used  as  motor 
transport  vehicles 

^ 

exemption  from  excise duty  on  waste oils 
which  are  re-used  as  fuel,  either  directly 
after  recovery,  or  following  a  recycling 
process,  and 
is 
subject  to duty,  until  31/12/96. 

the  re-use  of  which 

^ 

exemption  from  excise  duty  for  natural 
gas and  methane,  until  31/12/96 

36 

DECISION 
PROPOSAL 

NO  DECISION 
TAKEN  AT 
COUNCIL 

DECISION 
TAKEN  AT 
COUNCIL 

Council  Decision 
of  19/10/1992 
(92/510/EEC) 

Council  Decision 
of  13/12/1993 
(93/697/EEC) 

Council  Decision 
of  22/12/95 
(95/585/EC) 

BELGIUM 

REQUEST 

•^For 

local  public  passenger 

transport 

vehicles, 
for  LPG,  natural  gas and  methane, 

^ 
•^  in  respect  of  motors  used  for  the  drainage 

of  flooded  land, 

•^  in  respect  of  air  navigation  other  than  that 
covered  by  Article  8(1)  of  Directive 
92/81/EEC, 

"^for  navigation  in private pleasure  craft 

the 

use 

fuel  oil 
of 

^  until  31  December  1994  reduction  in  the 
to 
rate  of  duty  on  heavy 
encourage 
more 
environmentally  friendly  fuels  provided 
that  such  an 
is  specifically 
incentive 
linked  to  sulphur  content  and  provided 
that  the  weighted  average  rate  of  duty 
charged  on  heavy  fuel  oil  respects  the 
minimum  rate  of  duty  on  heavy  fuel  oils 
as  provided  for  in  Community  law:  in  no 
case  can  the  reduced  rate  fall  below  ECU 
6,5  per  tonne. 

^  Extension 

of 

above-mentioned 
the 
Decision  until  entry  into  force  of  the 
Community  arrangements  for  low-sulphur 
heavy  fuel  oil  and  competing  products  (at 
the latest  31.12.96) 

37 

REQUEST 

DECISION 
PROPOSAL 

NO  DECISION 
TAKEN  AT 
COUNCIL 

DECISION 
TAKEN  AT 
COUNCIL 

^ 

^ 

to 

partial 

the 
for 
reimbursement 
commercial  sector,  provided 
that  such 
taxes  are  in  conformity  with  Community 
provisions  and  provided  that  the  amount 
of  the  tax  paid  and  not  reimbursed  at  all 
times  respects  the  minimum  rates  of  duty 
or  monitoring  charge  on  mineral  oils  as 
provided  for  in  Community  law, 
for 
vehicles, 

local  public  passenger 

transport 

to  encourage 

•^  for  a  reduction  in  the  rate  of  duty  on 
diesel 
the  use  of  more 
environment  friendly  fuels  provided  that 
such  incentives  are  linked  to  established 
technical  characteristics  including  specific 
distillation 
gravity, 
content, 
sulphur 
index  and 
point,  cetane  number  and 
provided 
times 
respect  the  minimum  rates  of  duty  on 
mineral 
in 
Community  law, 
In  respect  of  air  navigation  other  than  that 
covered  by  Article  8(l)(b)  of  Directive 
92/81/EEC 

that  such  rates  at  all 

provided 

oils 

for 

as 

^ 

for  petrol 

^  Application  of  differential  rates  of  excise 
duty  between  petrol  distributed 
from 
petrol  stations  equipped  with  a  return 
system 
fumes  and  petrol 
from  other  petrol  stations, 
distributed 
provided 
times 
respect  the  minimum  rates  of  excise  duty 
on  mineral  oils  as  provided  for  under 
Community  law,  until  31/12/96. 

that  such  rates  at  all 

Council  Decision 
of  19/10/92 
(92/510/EEC) 

Article  1.2  of 
Council  Decision 
95/585/EC  of  22 
December  1995 

38 

ilî>ERÂL REPUBLIC OF GERMANY 

REQUEST 

DECISION 
PROPOSAL 

NO  DECISION 
TAKEN  AT 
COUNCIL 

DECISION 
TAKEN  AT 
COUNCIL 

^ 

for  the use of  waste  hydrocarbon  gases  as 
heating  fuel, 

^  on  samples  of  mineral  oils  intended  for 
analysis,  tests  on  production  or  for  other 
scientific  purposes, 

^  An  exemption  from  excise  duty  for  waste 
oils  which  are  re-used  as  fuel,  either 
directly  after  recovery  or  following  a 
recycling  process  for  waste  oils,  and  the 
re-use of which  is subject  to  duty. 

COM  (94) 493 of 
17/11/94 

"Tacit 
Agreement" 
(08/06/1994) 

Council  Decision 
of  19/10/1992 
(92/510/EEC) 

39 

OF SPAIN 

REQUEST 

^ 

for  LPG,  used  as  motor  fuel 
public  transport  vehicles, 

in  local 

^  An  exemption  from  excise  duty  for  waste 
oils  which  are  re-used  as  fuel,  either 
directly  after  recovery  or  following  a 
recycling  process  for  waste  oils,  and  the 
re-use of which  is subject  to  duty. 

DECISION 
PROPOSAL 

NO  DECISION 
TAKEN  AT 
COUNCIL 

DECISION 
TAKEN  AT 
COUNCIL 

Council  Decision 
of  19/10/1992 
(92/510/EEC) 

COM  (94) 493 of 
17/11/94 

"Tacit 
Agreement" 
(15/08/1994) 

40 

REQUEST 

DECISION 
PROPOSAL 

NO  DECISION 
TAKEN  AT 
COUNCIL 

DECISION 
TAKEN  AT 
COUNCIL 

for  use by the armed  forces  of  the State, 
for  local public  transport  vehicles, 

^ 
^ 
•^  in respect of desalination  plants, 
^ 

are 

specific 

gravity, 

to  encourage 

incentives 
technical 

for  a  reduction  in  the  rate  of  duty  on 
diesel 
the  use  of  more 
environmentally  friendly  fuels  provided 
linked 
that 
to 
such 
characteristics 
established 
including 
sulphur 
content,  distillation  point,  certain  number 
and  index  and  provided  that  such  rates  at 
all  times  respect  the  minimum  rates  of 
duty  on  mineral  oils  as  provided  for  in 
Community  law, 
for  navigation  in  private  pleasure  craft  not 
registered  in  Greece, 
for  LPG  and  methane  used  for  industrial 
purposes, 

^ 

^ 

^  Exemption 

from 

the  excise  duty  on 
mineral  oils  for  fuels  intended  to  be  used 
to  power 
the 
Ministry  of  the  Presidency,  the  national 
police  force  and  the  metropolitan  bishops. 

the  official  vehicles  of 

Council  Decision 
of  19/10/1992 
(92/510/EEC) 

Council  Decision 
of  13/12/93 
(93/697/EEC) 

41 

REQUEST 

DECISION 
PROPOSAL 

NO  DECISION 
TAKEN  AT 
COUNCIL 

DECISION 
TAKEN  AT 
COUNCIL 

O  for  fuel  used  in  taxis  within  the  limits  of 

^ 

^ 

^ 

an annual  quota, 
in  respect  of  air  navigation  other  than  that 
covered  by  Article  8(1 )(b)  of  Directive 
92/81/EEC, 
for  consumption  on  the  island  of  Corsica 
until  31 December  1994, 
in the framework  of  certain  policies  aimed 
from 
assisting 
at 
depopulation 

suffering 

regions 

Council  Decision 
of  19/10/1992 
(92/510/EEC) 

"Tacit 
Agreement" 
(08/06/1994) 

"Tacit 
Agreement" 
(23/02/1995) 

^  An  exemption  from  excise  duty  for  waste 
oils  which  are  re-used  as  fuel,  either 
recovery  or  following  a 
directly  after 
recycling  process  for  waste  oils,  and  the 
re-use of which  is subject  to  duty. 

COM  (94)  493 of 
17/11/94 

•^Extension  of  Decision  92/510/EEC 

for 

Corsica,  until  31/12/96 

COM  (95)  46 of 
27/02/95 

^  Request  for  an  exemption 

for  certain 
biofuels  produced  from  a  limited  range  of 
raw  materials  grown  only  on  set  aside 
land1  dated  23.03.95 

^  Request  for  an  exemption  on  LPG  and 
natural  gas  when  used  as  fuel  in  public 
transport.  The  exemption  will  be  given 
within  the  limits  of  an  annual  quota.  The 
measure  is  part  of  a  programme  to  reduce 
pollution,  limited  to  31  December  1998.2 

COM  (95)  248 of 
9/06/95 

COM  (96) 

Commission  Communication  to  the  Council.  The  request  causes  substantial  problems.  The 
Commission  requests  the  matter  be  brought  before  Council,  in  accordance  with  Article  8(4)  of 
Directive  92/81/EEC. 
FR:  The  request  was registered  in the Secretariat  General  on  1/04/96. 

42 

REQUEST 

DECISION 
PROPOSAL 

NO  DECISION 
TAKEN  AT 
COUNCIL 

DECISION 
TAKEN  AT 
COUNCIL 

•^Exemption  from  excise  duty  on  waste  oils 
which  are  re-used  as  fuel,  either  directly 
after  recovery,  or  following  a  recycling 
process  for  waste  oils  and  the  re-use  of 
which  is subject  to duty,  until  31/12/96. 

^ 

^ 

^ 

^ 

low 

rates  on 

for  diesel  and 

reformulated  un 

rates 
reduced 
sulphur  gasoil. 
reduced 
leaded  and  leaded  petrol. 
exemption  from  excise  duty  for  methane 
and  LPG  for  all  purposes; 
exemption  from  excise  duty  for  mineral 
oils used  for  private  pleasure  craft. 

Article  1.6  of 
Council  Decision 
95/585/EC  of 
22/12/95 

ACT  OF 
ACCESSION 
(JO C 241 of 
29.8.94) 

43 

REQUEST 

DECISION 
PROPOSAL 

NO  DECISION 
TAKEN  AT 
COUNCIL 

DECISION 
TAKEN  AT 
COUNCIL 

•^  in 

local  public  passenger 

transport 

vehicles, 

^ in  respect  of  air  navigation  other  than  that 
covered  by  Article  8(l)(b)  of  Directive 
92/81/EEC, 

^ in  respect  of  motors  used  for  the  drainage 

of  flooded  land, 

•^  the  use  of  waste  hydrocarbon  gases  as 

^ 
^ 

fuel, 
in respect  of  ambulances, 
for  consumption  in  the  regions  of  Val 
d'Aosta  and  Gorizia, 

^ f or  consumption  in  the  regions  of  Udine 
and  Trieste until  31 December  1994, 

•^  for  methane  used  as 

fuel 

in  motor 

vehicles, 
in respect of the national  armed  forces 

^ 

O  Until  31  December  1994,  exemption  from 
excise duty  on  mineral  oils used  as  fuel  in 
the production  of alumina  in  Sardinia 

Council  Decision 
of  19/10/1992 
(92/510/EEC) 

Council  Decision 
of  13/12/1993 
(93/697/EEC) 

ITALY (cont'd) 

44 

REQUEST 

DECISION 
PROPOSAL 

NO  DECISION 
TAKEN  AT 
COUNCIL 

DECISION 
TAKEN  AT 
COUNCIL 

^  Extension  on  reduction  or exemption  from 
excise  duty  for  mineral  oils  consumed  in 
the regions of Udine and  Trieste 

^  Exemption  in  the  excise  duty  on  fuel  oil, 
for  the  production  of  steam,  and  for  gas 
for  drying  and 
oil,  used 
'activating'  molecular  sieves  in  Reggio 
Calabria,  until  31 December  1996. 

in  ovens 

^  Reduction  of  excise  duty  rates  for  petrol 
territory  of  Friuli-
consumed  on 
the 
Venezia Giulia,  until  31 December  1996 

^Extension  on  the  exemption  from  excise 
duty  on  mineral  oils  used  as  fuel  in  the 
production  of  alumina  in  Sardinia,  until 
31 December  1996. 

" 

: 

1 

•*• 

COM  (94) 493 of 
17/11/94 

Tacit  extension 
until  31/12/98 

Article  1.3  of 
Council  Decision 
95/585/EC  of 
-  22/12/95 

Article  1.1  of 
Council  Decision 
96/273/EC  of 
22/04/96 

Article  1.1  of 
Council  Decision 
96/273/EC  of 
22/04/96 

i 

45 

REQUEST 

DECISION 
PROPOSAL 

NO  DECISION 
TAKEN  AT 
COUNCIL 

DECISION 
TAKEN  AT 
COUNCIL 

in  local  public  transport  vehicles 
in  motor  vehicles  used  by  the  disabled, 

^ 
^ 
•^  in the operation  of  lighthouses 
^ 

the  production  of  alumina  in  the  Shannon 
region, 
for  LPG,  natural  gas  and  methane  used  as 
motor  fuel 
in  respect  of  air  navigation  other  than  that 
covered  by  Article  8(1 )(b)  of  Directive 
92/81/EEC 
for  navigation  in private pleasure  craft. 

^ 

^ 

^ 

Council  Decision 
of  19/10/1992 
(92/510/EEC) 

^  Exemption  from  excise  duty  on  waste  oils 
which  are  re-used  as  fuel,  either  directly 
after  recovery,  or  following  a  recycling 
process  for  waste  oils,  and  the  re-use  of 
which  is subject  to  duty. 

COM  (94)  493 of 
17/11/94 

"Tacit 
Agreement" 
(16/11/1993) 

^  Differential 

rates  of 

tax  on  unleaded 
petrol  to  reflect  different  environmental 
categories  provided  that  such  rates  at  all 
times  respect  the  minimum  rates  of  duty 
on  mineral  oils  as  provided 
in 
Community  law,  until  31  December  1996. 

for 

COM  (96)  156 of 
15 April  1996 

Council  decision 
of  27.6.1996 
(96/418/EC) 

46 

DECISION 
PROPOSAL 

NO  DECISION 
TAKEN  AT 
COUNCIL 

DECISION 
TAKEN  AT 
COUNCIL 

Council  Decision 
of  19/10/92 
(92/510/EEC) 

Council  Decision 
of  13/12/93 
(93/697/EEC) 

Article  1.1  of 
Council  Decision 
of  22/12/95 
(95/585/EC) 

'*  <ÏRÂNl>-ï>UC»YOFJLUXEMBOURC 

REQUEST 

^ 
^ 

in  local  public transport  vehicles 
for  LPG,  natural  gas and  methane 

the 

use 

fuel  oil 
of 

^  Until  31 December  1994,  reduction  in  the 
rate  of  duty  on  heavy 
to 
more 
encourage 
environmentally  friendly  fuels  provided 
that  such  an 
is  specifically 
incentive 
linked  to  sulphur  content  and  provided 
that  the  weighted  average  rate  of  duty 
charged  on  heavy  fuel  oil  respects  the 
minimum  rate  of  duty  on  heavy  fuel  oils 
as  provided  for  in  Community  law;  in  no 
case  can  the  reduced  rate  fall  below  ECU 
6,5  per  tonne 

^  Extension 

of 

above-mentioned 
the 
decision  until  entry 
the 
Community  arrangements  for  low-sulphur 
heavy  fuel  oil  and  competing  products  (at 
the latest 31.12.96)  . 

into  force  of 

47 

KlNG!X>MOFniE 
1SWHE»LAN»S% 

REQUEST 

DECISION 
PROPOSAL 

NO  DECISION 
TAKEN  AT 
COUNCIL 

DECISION 
TAKEN  AT 
COUNCIL 

in respect of desalination  plants, 
^ 
^ 
for  LPG,  natural  gas and  methane, 
•^  in respect of  the national  armed  forces, 
^  on  samples  of  mineral  oils  intended  for 
analysis,  tests  on  production  or  for  other 
scientific  purposes, 
in  respect  of  motors  used  for  the  drainage 
of  flooded  land. 

^ 

Council  Decision 
of  19/10/92 
(92/510/EEC) 

48 

ammsxa*mmmHiB*etaMamiB3zsBss 

VÙKtVG&L 

iMitiimitmMààiiMimiimitiiii±^iiiiàiii±±iB±i 

REQUEST 

DECISION 
PROPOSAL 

NO  DECISION 
TAKEN AT 
COUNCIL 

DECISION 
TAKEN AT 
COUNCIL 

^  in respect of air  navigation  other  than  that 
covered  by  Article  8(l)(b)  of  Directive 
92/81/EEC 

^  exemption  from  excise  duty  on LPG, 
natural  gas and  methane when  used  as fuel 
for  local  public  transport 

^  An exemption  from  excise  duty  for waste 
oils  which  are  re-used  as  fuel,  either 
directly  after  recovery  or  following  a 
recycling  process  for waste  oils,  and  the 
re-use of which is subject  to duty. 

^  Reduction  in  excise  duty  on  fuel  oil 
consumed  in  the  autonomous  region  of 
Madeira.3. 

COM  (94) 493  of 
17/11/94 

"Tacit 
Agreement" 

Council  Decision 
of  19/10/92 
(92/510/EEC) 

Council  Decision 
of  13/12/93 
(93/697/EC) 

Article  1.5 of 
Council  Decision 
95/585/EC of 
22/12/95 

PT:  This reduction may not be greater than the additional costs incurred  in transporting the fuel oil 

to that region. 

49 

REQUEST 

DECISION 
PROPOSAL 

NO  DECISION 
TAKEN  AT 
COUNCIL 

DECISION 
TAKEN  AT 
COUNCIL 

•^for  local public passenger  transport  vehicles, 
for  navigation  in private pleasure  craft, 
^ 
for  LPG,  natural  gas  and  methane  used  as  motor 
^ 
fuel, 
in  respect  of  air  navigation  other 
covered 
92/81/EEC, 

that 
by  Article  8(1 )(b)  of  Directive 

than 

^ 

•^  in the operation  of  lighthouses. 

^  An  exemption  from  excise  duty  for  waste  oils 
which  are  re-used  as  fuel,  either  directly  after 
recovery  or  following  a  recycling  process  for 
waste  oils,  and  the  re-use  of  which  is  subject  to 
duty. 

COM  (94) 493 du 
17/11/94 

"Tacit 
Agreement" 
(25/04/1994) 

different 

•^  Differential  rates  of  tax  on  unleaded  petrol  to 
reflect 
categories 
provided  that  such  rates  at  all  times  respect  the 
minimum  rates  of  duty  on  mineral  oils  as 
provided  for  in  Community  law. 

environmental 

Council  Decision 
of  19/10/92 
(92/510/EEC) 

Council  Decision 
of  22/04/96 
(96/273/EC) 

50 

ÏÈ«àib*Mfl*±JSiàaictt*£*±S*= 

REQUEST 

DECISION 
PROPOSAL 

NO  DECISION 
TAKEN  AT 
COUNCIL 

DECISION 
TAKEN  AT 
COUNCIL 

.  ACT OF 
ACCESSION 
(JO C 241 du 
29.8.94) 

Council  Decision 
of  22/04/96 
(96/273/EC) 

• 
COM  (96) 

^ 

^  exemption 

reduced  excise  duty  rate  for  mineral  oils 
used  for  industrial  purposes, 
excise 

for 
biologically  produced  methane  and  other 
waste gases. 

from 

duty 

O  reduced  tax  rates  for  diesel  and 

light 
accordance  with 

heating 
environmental  classifications. 

oil 

in 

•^Exemption  from  excise  duty  on  aviation 
gasoline  used  for  private  pleasure  flying, 
until  31 December  1996 

reflect 

^Differential  rates  of  tax  on  unleaded  petrol 
to 
environmental 
different 
categories  provided  that  such  rates  at  all 
times  respect  the  minimum  rates  of  duty 
on  mineral  oils  as  provided 
in 
Community  law,  until  31 December  1996. 

for 

for 

•^Request  to apply  a reduced  excise duty  rate 
for  mineral  oils  used 
industrial 
purposes,  beyond  what  has  already  been 
authorised  in  the  Treaty  of  Accession.4 
The  exemption  should  be  formulated  so 
that  Sweden  can  apply  the  reduced  excise 
duty  on  mineral  oils  used  for  industrial 
purposes  both  by  using  a  lower  rate  than 
the  general  level  and  by  using  a  reduced 
for  enterprises  with  very  high 
rate 
consumption  of  energy. 
rates 
charged  will  not  be  less than  the  minimum 
rates 
92/82/EEC. 
in  Directive 
Limited  until  31 December  1996. 

The 

set 

SE:  Request registered  in the Secretariat  General  on  28/03/96 

51 

ANNEXB 

DEROGATIONS PROVIDED FOR IN ARTICLE 8  PARAGRAPHS  l . b)  AND  2.b) 
AND IN ARTICLE 8  PARAGRAPH 4  OF COUNCIL DIRECTIVE  9 2 / 8 1 / E EC 
OF 19  OCTOBER  1992  ON THE HARMONISATION OF THE STRUCTURES 
OF EXCISE DUTIES ON MINERAL OILS 

TABLE OF CONTENTS 

CATEGORIES : 

I. 

II. 

III. 

IV. 

V. 

Transport 

Industrial  and  Commercial  Sector 

Environmental  Policies 

Regional  Policies 

Other Policies 

52 

53 

56 

57 

60 

61 

I  -  CATEGORY:  TRANSPORT 

53 

mm 

mm 

mm 

mm 

mm 

mm 
mm 

AIR TRANSPORT 
a)  Exemption on mineral oils supplied for  use 
as fuels  for  the purpose  of  air navigation 
other than  private pleasure flying.  Article 
8J.(b) 

W ATERBORNB TRANSPORT 
a)  Exemptions or  reductions  on  rates  applied 

to mineral oils supplied for  the purposes of 
navigation on inland  waterway s other than 
in private pleasure craft.  Article 8.2.(b) 

b)  Derogations A rticle $.4 

}>)  Derogations A rticle 8.4 
a)  Exempt 

a)  Exemption  limited  to jet fuel  (Kerosene) 
b)  Exemption  in  respect  of air navigation  other 
than  that  covered  by  Article  8.l.b)  (Article 
1.1  of  Council  Decision  95/510/EEC  of  19 
October  1992) 

a)  Exemption  for  code  CN  2710 0031  and for 
kerosene  falling  within  codes  CN 2710  0037 
and 2710 0051 

a)  Exemption  limited  to jet fuel  (Kerosene) 
b)  Exemption  in  respect  of air navigation  other 
than  that  covered  by  Article  8.l.b)  (Article 
1.3  of  Council  Decision  92/510/EEC  of  19 
October  1992) 

a)  Exempt 

a)  Exempt 
a)  Exempt 
b)  Reduction  in  respect  of  air  navigation  other 
8. l.b) 

covered  by  Article 

than 
that 
(Accession Act). 

a)  Exemption  for navigation on the River 

Danube and on Lake Constance 

a)  Exemption  limited  to gas oil and kerosene 
b)  Exemption  for navigation  in private  pleasure 
(Article  1.1. - of  Council  Decision 

craft 
92/510/EEC of 19 October 1992) 

a)  Exempt. 

a)  Recovery  of excise duty 

a)  No exemptions 
b)  Exemption  for navigation  in private  pleasure 
crafts  not registered  in Greece  (Article  1.4 of 
Council  Decision  92/510/EEC  of  19 October 
1992) 

a)  Exempt 
a)  Exemption 
b)  Reduction  for private pleasure  craft 

(Accession Act) 

I  -  CATEGORY:  TRANSPORT 

(cont'd) 

54 

M,S. 

FR 

• 

LUX 

mm 

wm 

AIR  TRANSPORT 
a)  Exemption  on  mineral  oils  supplied for  use 
as  fuels  for  the  purpose  of  air  navigation 
other  than  private  pleasure  flying.  Article 
8J,Q>) 

w ATERBORNE TRANSPORT 
a)  Exemptions or reductions in rates applied to 

mineral oils  supplied for 
navigation  on inland waterways outer than 
in private pleasure cmfL  Article 8,2.(b) 

the purposes of 

1 0)  Derogations Article 8.4 

_ÉHÎÉiiii  r  n  "1 

111 r 

11 

a) 
b) 

Exemption  limited  to jet  fuel  (Kerosene) 
Exemption  in  respect  of  air  navigation  other 
than  that  covered  by  Article  8.l.b)  (Article 
1.3  of  Council  Decision  92/510/EEC  of  19 
October  1992) 

a)  Exempt 
b)  Exemption  in  respect  of  air  navigation  other 
than  that  covered  by  Article  8.l.b)  (Article 
1.8  of  Council  Decision  92/510/EEC  of  19 
October  1992) 

a)  Exemption  limited  to jet  fuel  (Kerosene) 
b)  Exemption  in  respect  of  air  navigation  other 
than  that  covered  by  Article  8.l.b)  (Article 
1.6  of  Council  Decision  92/510/EEC  of  19 
October  1992) 

b)  Derogations A rticle 8.4 

a)  Reduction  limited to gas oil  used by barges 

a)  Exempt 

a)  Exempt 
b)  Reduction  for  navigation  in  private  pleasure 
(Article  1.7  of  Council  Decision 

craft 
92/510/EEC  of  19 October  1992) 

a)  Exemption  limited  to  jet  fuel  (Kerosene) 

a)  Exemption  limited  to gas oil  and  kerosene 

a)  Exempt 

Exempt,  except 
marker  has not  been  added 

for 

light 

oils,  where  a 

a)  Exempt  (codes  NC 27100026 and 2710005) 
b)  Exemption  in  respect  of  air  navigation  other 
than  that  covered  by  Article  8.l.b)  (Article 
1.11  of  Council  Decision  92/510/EEC  of  19 
October  1992) 

a)  No  exemption 

I  - CATEGORY: TRANSPORT  (cont'd) 

55 

wmm 

mm 

mm 

AIRTRANSPORT 
a)  Exemption on mineral oils supplied for  use 
as fuels  for  the purpose of  air navigation 
other than private pleasure flying.  Article 
8.1.(b) 

WATERBORNE TRANSPORT 
a)  Exemptions or reductions in rates applied to 

mineral  oils  supplied for  the  purposes of 
navigation on  inland waterways  other than 
in private pleasure craft.  Article 8.2.(b) 

b)  Derogations Article 8.4 

b)  Derogations Article 8.4 
a)  Exemption  limited  to  jet  fuel  (Kerosene) 

"AVGAS" charged at half rate 

b)  Exemption  in  respect  of  air  navigation  other 
than  that  covered  by  Article  8.l.b)  (Article 
1.12  of  Council  Decision  92/510/EEC  of  19 
October  1992) 

a)  Exempt 
b)  Excise  exemption  for  petrol  used  in  private 
pleasure  flying  (Article  1.3  of  Council 
Decision 96/273/EC of 22.4.1996) 

a)  No exemption 
b)  For  navigation 
1.12. 

(Article 
92/510/EEC of  19 October 1992). 

in  private  pleasure  craft 
of  Council  Decision 

a)  Exempt 

II  -  CATEGORY:  INDUSTRIAL AND COMMERCIAL SECTOR 

56 

m 

mm 

mm 

mm 

Exemption on samples of  mineral  oils  intended  for  analysis 
(Article  1.2  of  Council  Decision  92/510/EEC  of  19 October  1992). 

a)  Partial  reimbursement  to the commercial  sector,  provided  that  such  taxes are in conformity  with 
Community  provisions  and  provided  that  the  amount  of  the  tax  paid  and  not  reimbursed  at all 
times  respects  the  minimum  rates  of  duty  or  monitoring  charge  on  mineral  oils  as  provided  for 
in Community  law 
(Article  1.3  of  Council  Decision  92/510/EEC  of  19 October  1992). 

a)  Exemption  on  mineral  oils used  as fuel  in the production  of alumina  in  Sardinia 

(Article  1.3  of  Council  Decision  93/697/EEC  of  13 December  1993) 
(Extended  until  31.12.96 by  Article  1.1  of  Council  Decision  96/273/EC  of 22.4.1996). 

b)  Reduction  on  fuel  oil,  for  the production  of steam,  and  for  gas oil,  used  in ovens  for  drying and 

'activating'  molecular  sieves  in  Reggio  Calabria,  until  31 December  1996 
(Article  1.3  of  Council  Decision  95/585/EC  of 22  December  1995). 

a)  Exemption  for  the production  of alumina  in  the Shannon  region 

(Article  1.7  of  Council  Decision  92/510/EEC  of  19 October  1992). 

a)  Exemption  on  samples of  mineral  oils  intended  for  analysis 

(Article  1.10  of  Council  Decision  92/510/EEC  of  19 October  1992). 

a)  Reduction  for  mineral  oils used  for  industrial  purposes 

(Accession  Act). 

b)  Request  to apply  a reduced  excise duty  rate for  mineral  oils used  for  industrial  purposes,  beyond 
that  already  authorised  in  the Treaty  of  Accession.  The  exemption  should  be  formulated  so that 
Sweden  can  apply  the  reduced  excise  duty  on  mineral  oils  used  for  industrial  purposes  both  by 
using  a  lower  rate  than  the general  level  and  by  using  a  reduced  rate  for  enterprises  with  a  very 
high  consumption  of  energy,  until  31  December  1996.  The  rates  charged  will  not  be  less  than 
the  minimum  rates set  out  in  Directive  92/82/EEC. 

III  -  CATEGORY:  ENVIRONMENTAL  POLICIES 

57 

mm 
wm 

a)  Exemption  for  LPG  used  as motor  fuel  in local  public passenger  transport  vehicles 

(Accession  Act). 

b)  Exemption  on waste oils which  are  re-used  as  fuel,  either  directly  after  recovery,  or  following  a 

recycling  process,  and  the re-use of which  is subject  to duty,  until  31  December  1996 
(Article  1.4  of  Council  Decision  95/585/EC  of 22 December  1995). 
c)  Exemption  from  excise duty  for  natural  gas and  methane until  31/12/96 

(Article  1.2  of Council  Decision  96/273/EC  of 22.4.1996) 

lilt 

a)  Partial  exemption  for  gas oil used  in local  public  passenger  transport  vehicles 

(Article  1.1  of  Council  Decision  92/510/EEC  of  19 October  1992). 

b)  For  LPG,  natural  gas and  methane 

(Article  1.1 of  Council  Decision  92/510/EEC of  19 October  1992). 

c)  Reduction  for  low-sulphur  heavy  fuel  ( <  =  1 %S) 

wm 

mm 

(Article  1.1  of  Council  Decision  93/697/EEC  and  Article  1.1  of  Council  Decision  95/585/EC 
of 22 December  1995). 

a)  Exemption  on waste oils which  are  re-used  as  fuel,  either  directly  after  recovery,  or  following  a 

recycling  process,  and  the re-use of which  is subject  to duty 
(COM  (94) 493  final  of  17.11.1994 -  Tacit Agreement  of  8.6.94) 

b)  For  the use of waste hydrocarbon  gases as heating  fuel 

(Article  1.2  of  Council  Decision  92/510/EEC  of  19 October  1992). 

a)  Exemption  for  LPG,  gas  and  ultra-light  gas  oil  used  for  local  public  passenger  transport 

vehicles 
(Article  1.3  of  Council  Decision  92/510/EEC  of  19 October  1992). 

b)  Reduction  in  the  rate  of  duty  on  diesel  to  encourage  the  use  of  more  environmentally-friendly 
fuels  provided  that  such  incentives  are  linked  to  established  technical  characteristics  including 
specific  gravity,  sulphur  content,  distillation  point,  certain  number  and  index  and  provided  that 
such  rates  at  all  times  respect  the  minimum  rates  of  duty  on  mineral  oils  as  provided  for  in 
Community  law 
(Article  1.3  of  Council  Decision  92/510/EEC  of  19 October  1992). 

c)  Application  of  differential  rates  of  excise  duty  between  petrol  distributed  from  petrol  stations 
equipped  with  a return  system  for  petrol  fumes  and  petrol  distributed  from  other  petrol  stations, 
provided  that  such  rates  at  all  times  respect  the  minimum  rates  of  excise duty  on  mineral  oils  as 
provided  for  under  Community  law,  until  31  December  1996 
(Article  1.2  of  Council  Decision  95/585/EC  of 22  December  1995). 

mm 

a)  For  local  public  passenger  transport  vehicles 

(Article  1.4  of  Council  Decision  92/510/EEC  of  19 October  1992). 

b)  Exemption  for  LPG  and  methane  used  for  industrial  purposes 

(Article  1.4  of  Council  Decision  92/510/EEC of  19 October  1992). 

c)  Reduction  in  the  rate  of  duty  on  diesel  to  encourage  the  use  of  more  environmentally  friendly 
fuels  provided  that  such  incentives  are  linked  to  established  technical  characteristics  including 
specific  gravity,  sulphur  content,  distillation  point,  certain  number  and  index  and  provided  that 
such  rates  at  all  times  respect  the  minimum  rates  of  duty  on  mineral  oils  as  provided  for  in 
Community  law 
(Article  1.4  of  Council  Decision  92/510/EEC of  19 October  1992). 

III  -  CATEGORY:  ENVIRONMENTAL  POLICIES  (cont'd) 

58 

.M;S. 
ES 

lin 

W5SCT5SWSSWSWWWPW 

1 

I  a)  Exemption  for  liquid  petroleum gas used as motor  fuel  in local  public transport  vehicles 

(Article  1.5  of Council  Decision  927510/EEC of  19 October  1992). 

b)  Exemption  on waste oils which  are re-used  as  fuel,  either  directly  after  recovery,  or  following  a 

recycling  process,  and  the re-use of which  is subject  to duty 
(COM  (94) 493 final of  17.11.1994 -  Tacit Agreement  of  15.8.94). 

a)  Exemption  on waste oils which  are  re-used  as fuel,  either  directly  after  recovery,  or  following  a 

recycling  process,  and  the re-use of which  is subject  to duty,  until  31 December  1996 
(Article  1.6  of Council  Decision  95/585/EC  of 22 December  1995). 

b)  For  methane and  LPG  used  for all  purposes 

(Accession  Act). 

c)  Reduced  rates for  diesel  and  low sulphur  gasoil 

(Accession  Act). 

d)  Reduced  rates on  reformulated  unleaded  and  leaded  petrol 

,  (Accession  Act). 

sERl 

a)  Exemption  on waste oils which  are  re-used  as  fuel,  either  directly  after  recovery,  or  following  a 

mil 

mm 

recycling  process,  and  the re-use of which  is subject  to duty 
(COM  (94) 493 final of  17.11.1994  - Tacit Agreement  of  8.6.94). 
b)  Exemption  for  fuels  used  by  taxis within  the limits of an annual  quota 

(Article  1.6.  of  Council  Decision  92/510/EEC  of  19 October  1992). 

c)  Request  for  exemption  for  LPG  and  natural  gas within  the  limits  of  an  annual  quota  when  these 

are used  as fuels  for  public  transport,  in the framework  of reducing  pollution. 

a)  Reduction  for  vehicles  used  as local  public passenger  transport  vehicles 
(Article  1.8  of  Council  Decision  92/510/EEC  of  19 October  1992). 

b)  For  methane used  as fuel  in motor  vehicles 

(Article  1.8  of  Council  Decision  92/510/EEC  of  19 October  1992). 

c)  For  use of waste hydrocarbon  gases as  fuel 

(Article  1.8  of  Council  Decision  92/510/EEC  of  19 October  1992). 
a)  Reduction  for  vehicles used  as local  public  passenger  transport  vehicles 
(Article  1.7  of  Council  Decision  92/510/EEC  of  19 October  1992). 

b)  LPG,  natural  gas and  methane used  as motor  fuel 

(Article  1.7  of  Council  Decision  92/510/EEC  of  19 October  1992). 

c)  Exemption  on waste oils which  are  re-used  as  fuel,  either  directly  after  recovery,  or  following  a 

recycling  process,  and  the re-use of which  is subject  to duty 
(COM  (94) 49$ final of  17.11.1994  - Tacit Agreement  of  16.11.93). 

d)  Application  of  differential  rates  on  unleaded  petrol  corresponding  to  different  environmental 

categories 
(Council  Decision  96/418/EC  of  27.6.1996). 

III  -  CATEGORY:  ENVIRONMENTAL  POLICIES 

(cont'd) 

59 

a)  Only  LPG,  natural  gas and  methane for  local  public passenger  transport  vehicles 

(Article  1.9  of  Council  Directive 92/510/EEC  of  19 October  1992). 

b)  For  LPG,  natural  gas and  methane 

(Article  1.9  of Council  Decision  92/510/EEC  of  19 October  1992). 

c)  Reduction  for  low-sulphur  heavy  fuel  ( <  = 1 %S) 

(Article  1.1  of  Council  Decision  93/697/EEC  and Article  1.1  of  Council  Decision  95/585/EC 
of 22 December  1995). 

a)  For  LPG,  natural  gas and  methane 

(Article  1.10  of  Council  Decision  92/510/EEC  of  19 October  1992). 

a)  Exemption  for  LPG,  methane and  natural  gas for  local public  passenger  transport  vehicles 

(Article  1.4  of  Council  Decision  93/697/EEC  of  13 December  1993). 

b)  Exemption  on waste oils which  are re-used  as  fuel,  either  directly  after  recovery,  or  following  a 

recycling  process,  and  the re-use of which  is subject  to duty 
(COM  (94) 493  final  of  17.11.1994 -  Tacit Agreement  of 8.6.94). 

a)  For  vehicles used  for  local  public passenger  transport 

(Article  1.12  of Council  Decision  92/510/EEC  of  19 October  1992). 

b)  For  LPG,  natural  gas and  methane used  as motor  fuel 

(Article  1.12  of  Council  Decision  92/510/EEC of  19 October  1992). 

c)  Exemption  on waste oils which  are  re-used  as  fuel,  either  directly  after  recovery,  or  following  a 

recycling  process,  and  the  re-use of which  is subject  to duty 
(COM  (94) 493  final  of  17.11.1994  -  Tacit Agreement  of  25.4.94). 

d)  Application  of  differential  rates  on  unleaded  petrol  corresponding  to  different  environ-mental 

categories 
(Article  1.4  of  Council  Decision  96/273/EC  of  22.4.1996). 

a)  Exemption  for  biologically  produced  methane and  other  waste gases 

(Accession  Act). 

b)  Request  for  application  of  differential  rates  on  unleaded  petrol  corresponding  to  different 

environmental  categories 
(Article  1.3  of Council  Decision  96/273/EC  of 22.4.1996). 

c)  Reduced  rates  for  diesel  and  light  heating  oil  in accordance with  environmental  classifications 

(Accession  Act). 

wm 

mm 

wm 

mm 

IV  -  CATEGORY:  REGIONAL POLICIES 

60 

m&m 
MI 

a)  Reimbursement  of  6.63F/hl  for  gasoline  for  consumption  on  the  island  of  Corsica  or  gasoline 
delivered  from  the harbours  of  Corsica  to private pleasure craft,  until  31  December  1994  (Tacit 
extension  until  31.12.96  - COM  (95) final of 27.02.95). 
(Article  1.6  of  Council  Decision  92/510/EEC of  19 October  1992). 

wm 

a)  For  consumption  in the regions of  Val d'Aosta and  Gorizia 

(Article  1.8  of  Council  Decision  92/510/EEC  of  19 October  1992). 

b)  For  consumption  in the regions of Udine and Trieste,  until  31 December  1994 

(Article  1.8  of  Council  Decision  92/510/EEC  of  19  October  1992).  (Tacit  extension  until 
31.12.98  - COM  (95) 493 final of  17.11.94). 

c)  Reduction  in the rate of duty  for  petrol  consumed  on  the territory  of  "Friuli-Venezia  Giulia" 

(Article  1.1  of  Council  Decision  96/273/EC  of 22.4.1996). 

wm 

a)  Reduction  in  the  rate  of  duty  on  fuel  oil  consumed  in  the  autonomous  region  of  Madeira,  until 
31  December  1996.  This  reduction  should  not  be greater  than  the  additional  costs  arising  from 
the transport  of  the goods  in question  to the place of  consumption 
(Article  1.5  of  Council  Decision  95/585/EC  of 22 December  1995) 

V  -  CATEGORY: OTHER POLICIES 

61 

MS. 
BE 

EL 

WM 

» 

a)  For  motors used  for  the drainage of  flooded  land 

(Article  1.1  of  Council  Decision  92/510/CE of  19 October  1992). 

a) 

b) 

c) 

Exemption  for  the armed  forces  of the State 
(Article  1.4  of  Council  Decision  92/510/CE  of  19 October  1992). 
Exemption  for  fuels  used  to  power  the  official  vehicles  of  the  Ministry  of  the  Presidency,  the 
national  police  force  and  the metropolitan  bishops 
(Council  Decision  93/697/EC  of  13 December  1993). 
For desalination  plants 
(Article  1.4  of  Council  Decision  92/510/EEC  of  19 October  1992). 

a)  Exemption  in  the  framework  of  certain  policies  aimed  at  assisting  areas  suffering 

from 

depopulation 
(Article  1.6  of  Council  Decision  92/510/EEC of  19 October  1992). 
a)  Reduction  of 50%  on  normal  rate (petrol  and  LPG)  for  ambulances 
(Article  1.8  of  Council  Decision  92/510/EEC  of  19 October  1992). 
b)  Exemption  for  the national  armed  forces  that are part  of the NATO  forces 
(Article  1.8  of  Council  Decision  92/510/EEC  of  19 October  1992). 

c)  Exemption  for  motors  used  for  the drainage of  flooded  land 

(Article  1.8  of  Council  Decision  92/510/EEC of  19 October  1992). 

itRll 

a)  For  the operation  of  lighthouses 

(Article  1.7  of  Council Decision  92/510/EEC  of  19 October  1992). 

b)  For  motor  vehicles  used  by  the disabled 

(Article  1.7  of  Council  Decision  92/510/EEC  of  19 October  1992). 

a)  For  the national  armed  forces 

(Article  1.10  of  Council  Decision  92/510/EEC  of  19 October  1992). 

b)  Reduction  for  motors  used  for  the drainage of  flooded  land, 

(Article  1.10  of  Council  Decision  92/510W/EEC of  19 October  1992). 

c)  Reduction  only  on  gas oil  used  by desalination  plants 

(Article  1.10  of  Council  Decision  92/510/EEC  of  19 October  1992). 

a)  For  the operation  of  lighthouses, 

(Article  1.12  of  Council  Decision  92/510/EEC of  19 October  1992). 

mm 

mm 

62 

Proposal  for a 

COUNCIL DECISION 

authorising Member States to continue to apply to certain  mineral oils, when used  for 
specific purposes, existing reduced  rates of excise duty or exemptions from  excise 
duty, in accordance with the procedure provided  for  in Article 8 (4) of Directive 
92/81/EEC. 

63 

Proposal for a 

COUNCIL DECISION 

** 

! 

U 

J 

authorising  Member States to continue to apply  to certain  mineral  oils,  when  used  for 
specific  purposes,  existing  reduced  rates  of  excise  duty  or  exemptions  from  excise 
duty,  in  accordance  with  the  procedure  provided  for  in  Article  8  (4)  of  Directive 
92/81/EEC. 

THE COUNCIL OF THE EUROPEAN UNION, 

Having regard to the Treaty establishing the European  Community; 

Having  regard  to  Council  Directive  92/81/EEC  of  19  October  1992  on  the 
harmonisation  of  the  structures  of  excise  duties  on  mineral  oils1  and  in  particular 
Article 8 (4) thereof; 

Having regard to the proposal from  the Commission2; 

Having regard to the opinion of the European Parliament3; 

Whereas,  pursuant  to  Article  8 (4)  of  Directive  92/81/EEC,  the  Council,  acting 
unanimously on a proposal from  the Commission,  may authorise any  Member  State to 
introduce  exemptions  or  reductions  in  the  excise  duty  charged  on  mineral  oils  for 
special policy considerations; 

Whereas,  the  Commission  has  been  informed  by  Member  States  of  their  intention  to 
continue to apply certain  such exemptions or reductions which are already provided  for 
in  their  taxation  law  or  to  introduce  exemptions  or  reductions  and  to  which  the 
procedure provided for under the said Article 8 (4) should be applied; 

Whereas, the other Member States have been informed  thereof; 

OJ No L 316,  31.10.1992, p.  12 Directive as amended by Directive 94/74/EC (OJ No 365, 
31.12.1994, p. 46). 

64 

Whereas, all of the exemptions and reductions referred  to in Article  1 shall continue to 
have effect  until 31 December  1998 for  specific policy considerations provided  they do 
not give rise to distortions in competition  or interfere  with the working of the internal 
market; 

Whereas, all the exemptions and reductions referred  to in Article 2 shall cease to have 
effect  from  31 December 1996; 

Whereas, all the exemptions and  reductions  referred  to in  Article 3 shall be abolished 
with effect  from  1  January 1997; 

Whereasj  the reductions or exemptions  will be regularly  reviewed  by the Commission 
to  ensure  their  compatibility  with  the  operation  of  the  internal  market  and  other 
objectives of the Treaty; 

Whereas, pursuant to Article 8 (6) of Directive 92/81/EEC,  the Council is required  to 
review the situation at the latest by 31 December  1996 on the basis of a report from  the 
Commission; 

HAS ADOPTED THIS DECISION: 

Article 1 

In  accordance  with  the  provisions  of  Article  8 (4)  and  Article 8 (6)  of  Directive 
92/81/EEC and notwithstanding the obligations imposed by Directive 92/82/EEC of 19 
October  1992 on  the approximation  of  the rates of excise duties on  mineral oils<4\  the 
following  Member States are authorised  to apply or to continue to apply the reductions 
in  rates  of  excise  duties  or  exemptions  from  excise  duty  herein  specified  until  31 
December 1998: 

1. 

in the Kingdom of Belgium: 

for local public passenger transport vehicles, 
for LPG, natural gas and methane, 
for a reduction in the rate of excise duty on heavy fuel  oil to encourage the use 
of  more environmentally  friendly  fuels.  Such  reduction  shall  be  specifically 
linked  to sulphur content  and  the rate of  duty  charged  on  heavy  fuel  oil shall 
respect  the  minimum  rate  of  duty  on  heavy  fuel  oils  as  provided  for  in 
Community law, in force. 

OJ No L 316, 31.10.1992, p.  12 Directive as amended by Directive 94/74/EC, OJ No 365, 
31.12.1994, p. 46 

2. 

in the Kingdom of Denmark: 

65 

for  partial  reimbursement  to  the  commercial  sector,  provided  that  such  taxes 
are in conformity  with  Community  provisions and provided  that the amount of 
the tax paid and not reimbursed  at all times respects the minimum  rates of duty 
or monitoring charge on mineral oils as provided  for in Community law, 
for local public passenger transport vehicles, 
for  a  reduction  in  the  rate  of  duty  on  diesel  to  encourage  the  use  of  more 
environment  friendly  fuels  provided  that  such  incentives  are  linked  to 
established  technical characteristics  including  specific  gravity,  sulphur content, 
distillation  point,  cetane number  and  index  and  provided  that  such  rates  at all 
times  respect  the  minimum  rates  of  duty  on  mineral  oils  as  provided  for  in 
Community law, 
for  the  application  of  differential  rates  of  excise  duty  between  petrol 
distributed  from  petrol  stations equipped  with a return  system  for  petrol  fumes 
and petrol distributed  from  other petrol  stations, provided  that such  rates at all 
times respect the minimum  rates of excise duty on  mineral  oils as provided  for 
under Community law. 

3. 

in the Federal Republic of Germany: 

for  the use of waste hydrocarbon  gases as heating  fuel, 
on  samples  of  mineral  oils  intended  for  analysis,  tests  on  production  or  for 
other scientific purposes, 
for  reductions  in  or exemptions  from  excise duty  for  waste  oils  which  are re 
used as fuel,  either directly after  recovery  or following  a recycling  process  for 
waste oils, and where the re-use is subject  to duty. 

4. 

in the Hellenic Republic: 

for  local public transport vehicles, 
in respect of desalination  plants, 
for  LPG and methane used for industrial  purposes. 

5. 

in the Kingdom of Spain: 

for LPG,  used as motor fuel  in local public transport vehicles, 
for  reductions  in  or  exemptions  from  excise duty  for  waste  oils  which  are re 
used as fuel,  either directly  after  recovery  or following  a recycling  process  for 
waste oils, and where the re-use is subject  to duty. 

6. 

in the French Republic: 

for consumption  on the island of Corsica,  provided  that the reduced  rates at all 
times respect the minimum  rates of duty on  mineral  oils as provided  for  under 
Community law, 
for  reductions in  or  exemptions  from  excise duty  for  waste  oils  which  are re 
used as fuel,  either directly  after  recovery  or following  a recycling  process  for 
waste oils, and where the re-use is subject  to duty. 

7. 

in the Italian Republic: 

66 

in local public passenger transport vehicles, 
for waste hydrocarbon  gases used as fuel, 
for consumption  in the regions of Val d'Aosta and Gorizia, 
for methane used as fuel  in motor vehicles, 
for  a  reduction  in  the rate  of  excise  duty  on  mineral  oils  used  as  fuel  in  the 
production  of  alumina  in  Sardinia,  provided  that  the  rate  of  duty  respects  the 
minimum rates of duty on mineral oils as provided  for  under Community law, 
for a reduction  in the excise duty on fuel  oil,  for  the production  of  steam, and 
for  gas  oil,  used  in  ovens  for  drying  and  'activating'  molecular  sieves  in 
Reggio Calabria;  provided  that the rate of  duty  respects  the minimum  rates of 
duty on mineral oils as provided  for under Community law, 
for  a  reduction  in  excise  duty  on  petrol  consumed  on  the  territory  of  Friuli-
Venezia  Giulia,  provided  that  the  rates  of  duty  respects  the  minimum  rate 
.provided  for  under Community law, 
for  a reduction  in the rate of duty  for  mineral  oils consumed  in  the regions of 
Udine and Trieste, provided  that the rates of duty applied  respect the minimum 
rates provided  for  under Community law. 

8. 

in Ireland: 

in local public transport vehicles, 
for the production  of alumina in the Shannon region, 
for LPG,  natural gas and  methane used as motor  fuel, 
for  reductions  in or exemptions  from  excise duty  for  waste  oils  which  are re 
used as fuel,  either directly after  recovery or following  a recycling  process  for 
waste oils, and where the re-use is subject to duty, 
for  differential 
to  reflect  different 
environmental  categories,  provided  that  such  rates  at  all  times  respect  the 
minimum  rates of duty on mineral oils as provided  for  in Community law. 

tax  on  unleaded  petrol 

rates  of 

9. 

in the Grand Duchy of Luxembourg: 

in local public transport vehicles, 
for LPG,  natural  gas and methane, 
for a reduction  in the rate of excise duty on heavy fuel  oil to encourage the use 
of  more  environmentally  friendly  fuels.  Such  reduction  shall  be  specifically 
linked  to  sulphur  content  and  the rate  of  duty  charged  on  heavy  fuel  oil  shall 
respect  the  minimum  rate  of  duty  on  heavy  fuel  oils  as  provided  for  in 
Community  law in force. 

10.  in the Kingdom  of the Netherlands: 

in respect of desalination plants, 
for  LPG,  natural gas and methane, 

67 

11.  in the Republic of Austria: 

for LPG used as motor local public passenger transport vehicles, 
for  an  exemption  from  excise  duty  on  waste  oils  which  are  re-used  as  fuel, 
either directly  after  recovery,  or  following  a recycling  process  for  waste oils, 
and the re-use of which is subject to duty, 
natural gas and methane. 

12.  in the Portuguese Republic: 

to grant  relief  from  excise duty  for  LPG,  natural  gas and  methane when  used 
as fuel  for local public transport, 
for  a reduction  in excise duty  on  fuel  oil  consumed  in  the autonomous  region 
of  Madeira;  this  reduction  may  not  be  greater  than  the  additional  costs 
incurred  in transporting the fuel  oil to that region, 
for  reductions  in or exemptions  from  excise duty  for  waste oils  which  are re 
used as fuel,  either directly after  recovery or following  a recycling process  for 
waste oils, and where the re-use is subject to duty. 

13.  in the Republic of Finland: 

for an exemption  from  excise duty for  methane and LPG for all purposes, 
for  an  exemption  from  excise  duty  on  waste  oils  which  are  re-used  as  fuel, 
either  directly  after  recovery,  or  following  a recycling  process  for  waste oils, 
and the re-use of which  is subject  to duty. 

14.  in the Kingdom of Sweden: 

for  reduced  excise  duty  rate  for  mineral  oils  used  for  industrial  purposes, 
provided  that  such  rates  at  all  times  respect  the  minimum  rates  of  duty  on 
mineral oils as provided  for  in Community law. 
for  an  exemption  from  excise  duty  for  biologically  produced  methane  and 
other waste gases, 
for  reduced  tax  rates  for  diesel  and  light  heating  oil  in  accordance  with 
environmental  classifications, 
for  differential 
to  reflect  different 
environmental  categories,  provided  that  such  rates  at  all  times  respect  the 
minimum  rates of duty on mineral oils as provided  for  in Community law. 

tax  on  unleaded  petrol 

rates  of 

15.  in the United  Kingdom of Great Britain and Northern  Ireland: 

rates  of 

for local public passenger transport vehicles, 
for  LPG,  natural gas and  methane used as motor  fuel, 
for  differential 
to  reflect  different 
environmental  categories,  provided  that  such  rates  at  all  times  respect  the 
minimum  rates of duty on mineral oils as provided  for  in Community law, 
for  reductions in or exemptions  from  excise duty  for  waste oils  which  are re 
used as fuel,  either directly  after  recovery or following  a recycling  process  for 
waste oils, and where the re-use is subject  to duty. 

tax  on  unleaded  petrol 

68 

Article 2 

The following derogations shall cease to have effect  from  31 December  1996. 

1. 

in the Kingdom of Belgium: 

in respect of motors used for the drainage of flooded  land, 
in  respect  of  air  navigation  other  than  that  covered  by  Article  8(l)(b)  of 
Directive 92/81/EEC, 
for navigation  in private pleasure  craft. 

2. 

in the Kingdom of Denmark: 

in  respect  of  air  navigation  other  than  that  covered  by  Article  8(1 )(b)  of 
Directive 92/81/EEC. 

3. 

in the Hellenic Republic: 

for  use by the armed  forces of the State, 
for  a  reduction  in  the  rate  of  duty  on  diesel  to  encourage  the  use  of  more 
environmentally  friendly  fuels  provided  that  such  incentives  are  linked  to 
established  technical characteristics  including  specific  gravity,  sulphur content, 
distillation  point,  cetane  number  and  index  and  provided  that  such  rates at all 
times  respect  the  minimum  rates  of  duty  on  mineral  oils  as  provided  for  in 
Community law, 
for navigation  in private pleasure craft  not registered  in Greece, 
to  grant  relief  from  the  excise  duty  on  mineral  oils  for  fuels  intended  to  be 
used  to  power  the  official  vehicles  of  the  Ministry  of  the  Presidency,  the 
national police force and the metropolitan bishops. 

4. 

in the French Republic: 

for fuel  used in taxis within  the limits of an annual quota, 
in  respect  of  air  navigation  other  than  that  covered  by  Article  8(1 )(b)  of 
Directive 92/81/EEC. 
in  the  framework  of  certain  policies  aimed  at  assisting  areas  suffering  from 
depopulation, 

5. 

in the Italian  Republic: 

in  respect  of  air  navigation  other  than  that  covered  by  Article  8  (l)(b)'of 
Directive 92/81/EEC, 

in respect of motors used for the drainage of flooded  land, 
in respect of ambulances, 
in respect of the national armed  forces. 

69 

6. 

in Ireland: 

in motor vehicles used by the disabled, 
in the operation of lighthouses, 
in  respect  of  air  navigation  other  than  that  covered  by  Article  8  (l)(b)  of 
Directive 92/81/EEC, 
for navigation  in private pleasure  craft. 

7. 

in the Kingdom of the Netherlands: 

in respect of the national armed  forces, 
in respect of motors used for the drainage of flooded  land, 
on  samples  of  mineral  oils  intended  for  analysis,  tests  on  production  or  for 
other scientific  purposes. 

8. in the Portuguese Republic: 

in  respect  of  air  navigation  other  than  that  covered  by  Article  8(1 )(b)  of 

Directive 92/81/EEC. 

9. 

in the Republic of Finland: 

for  an  exemption  from  excise  duty  for  mineral  oils  used  for  private  pleasure 
craft. 

10.  in the Kingdom of Sweden: 

for  an  exemption  from  excise duty  on aviation  gasoline and  aviation  kerosene 
used for private pleasure  flying. 

11.  in the United  Kingdom of Great Britain and  Northern  Ireland: 

for navigation  in private pleasure  craft, 
in  respect  of  air  navigation  other  than  that  covered  by  Article  8(1 )(b)  of 
Directive 92/81/EEC, 
in the operation of lighthouses. 

Article 3 

70 

1.  Council  Decisions  92/510/EEC5,  93/697/EC6,  95/585/EC7,  96/273/EC8  and 
96/418/EC9are abolished with effect  from  1 January  1997. 

2.  The  following  authorisations  which  were  granted  following  requests  made  for 
specific  policy considerations  and which are to be deemed  to have been  tacitly  decided 
by the Council after the expiry of the two month deadline provided  for in Article 8.4  of 
Directive 92/81/EEC are abolished with effect  from  1  January  1997: 

That granted to Germany  following  its request of  15 March  1994 which was notified  to 
Member States by the Commission  on 7 April  1994. 

That  granted  to  Spain  following  its  request  of  17  May  1994  which  was  notified  to 
Member States by the Commission  on  17 June 1994. 

That granted  to France  following  its  request of  13 December  1993  which  was  notified 
to Member States by the Commission  on 7 April  1994. 

That granted  to France following  its  request of  23  November  1994  which  was  notified 
to Member States by the Commission  on  19 December  1994. 

That  granted  to  Italy  following  its  request  of  15  March  1994  which  was  notified  to 
Member States by the Commission  on 5 April  1994. 

That  granted  to  Ireland  following  its  request  of  30  July  1993  which  was  notified  to 
Member States by the Commission  on  15 September  1993. 

That granted to  Portugal  following  its request of  11 March  1994 which  was  notified  to 
Member States by the Commission  on 7 April  1994. 

That  granted  to  the  United  Kingdom  following  its  request  of  20  January  1994  which 
was notified  to Member States by the Commission on 24 February  1994. 

This Decision  is addressed  to the Member States. 

Article 4 

Done at 

5 
6 
7 
8 
9 

of 19 October  1992, OJL 316/31.10.  1992, p. 16 
of 13 December  1993, OJ L 321/23.12.  1993, p. 29 
of 22 December  1995, OJ L 327/30.12.  1995, p.33 
of 22 April  1996, OJ L 102/24.04.  1996, p. 40 
of 27 June  1996,  OJ L 172/11.7.1996, p. 22 

= >1 

ISSN 0254-1475 

COM(96) 549 final 

DOCUMENTS 

EN 

09  02  07 

Catalogue number  :  CB-CO-96-553-EN-C 

ISBN  92-78-10785-9 

Office  for Official  Publications of the European Communities 

L-2985 Luxembourg