Communication from the Commission to the Council - Request by the Italian Government for authorisation to introduce a measure derogating from Council Directive 92/81/EEC, based on Article 8(4) of that Directive, in respect of a reduced rate of excise duty on automotive diesel fuel for commercial vehicles
Date: 1999-10-06
Institutions: European Commission
Subjects: Italy, diesel fuel, excise duty, mineral oil, tax harmonisation

EN

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 06.10.1999
COM(1999)459 final

COMMUNICATION FROM THE COMMISSION
TO THE COUNCIL

Request by the Italian Government for authorisation to introduce a measure
derogating from Council Directive 92/81/EEC, based on Article 8(4) of that
Directive, in respect of a reduced rate of excise duty on automotive diesel fuel for
commercial vehicles

1.

Introduction

(a)

(b)

(c)

In accordance with Council directive 92/81/EEC, Member States are
required to apply the harmonised system for the structures of excise
duties on mineral oils. Under Article 8(4) of that Directive, the Council
may authorise any Member State to introduce further duty exemptions
or reductions for specific policy considerations.

In a series of letters from the Office of the Italian Permanent
Representation, culminating in a letter received by the Commission's
Secretariat General on 29 June 1999, the Commission was informed of
a measure aimed at reducing the excise duty on automotive diesel oil
for certain commercial vehicles.

letter

from the Commission's Secretariat General dated
In a
28 July 1999, the other Member States were informed, in accordance
with Article 8(4) of the above Directive, of the measure proposed by
the Italian Government. Under the same Article, the Commission or
any Member State may request that the Council consider the matter.

2.

Description of the measure

Italy has modified its mineral oils duty system to incorporate tax levels based
on the CO2 emissions of the fuels. This will result in an annual increase of
duty on mineral oils until 2005.

During the same period, there will be an equivalent reduction in the current
circulation tax surcharge for private diesel vehicles. This will result in the
operating costs of these vehicles remaining effectively unchanged. However,
diesel powered commercial vehicles have not been subject to the special
surcharge and will face increased costs as a result of the duty increases.

The Italian authorities therefore wish to introduce a mechanism that will
allow road haulage operators who carry goods on behalf of third parties to
reclaim the extra duty. This is similar in concept to other schemes already in
place in the Netherlands and France although it differs in detail as it only
applies to the diesel powered commercial vehicles operated by professional
hauliers. It would not apply to the same vehicles used by enterprises in
transporting their own goods.

For hauliers within the Italian tax system, the repayment will be made using
an offset system, either monthly or quarterly, initially on a provisional basis
using the equivalent consumption figures from the previous year. These will
then be corrected at the end of each tax year using the actual consumption
figures. Non Italian EU hauliers will also be eligible for repayment but
would be required to register with the Transport Ministry and submit claims
to the Finance Ministry via a fiscal representative.

2

3.

Commission's opinion

The procedure provided for in Article 8(4) of Council Directive 92/81/EEC
permits Member States to introduce exemptions or reductions in excise duty
for specific policy considerations.

The tax system modification introduced by the Italian Government has been
based on environmental concerns. They have informed the Commission that
the new system makes it possible to harmonise the system of duties on fossil
fuels with regard to the standards adopted by the European Commission.
Furthermore it also provides a mechanism for taxing Carbon Dioxide (CO2)
thus
emissions from various fuels according to their Carbon content,
discouraging the use of the more polluting fuels.

The excise duty derogation requested by the Italian Government would be to
compensate road hauliers who transport goods on behalf of third parties for
their additional costs caused by increases in excise duty on automotive diesel
under the new tax system, and therefore help them adapt to the new situation.

The Commission has previously agreed that tax differentials in the transport
sector are acceptable under State Aid rules if they are intended to ensure the
attainment of agreed objectives under the Common Transport Policy and also
in Council Directive
respect
92/82/EEC. Tax differentials helping to achieve certain well-defined
environmental objectives, in principle fall into this category.

the minimum rates of excise duty set out

However, the Italian Government's derogation request limits the application
of the derogation to road haulage operators engaged in the transport of goods
for third parties. This limitation introduces a discriminatory factor absent
from the earlier derogations. It means that enterprises that use their own
diesel-powered commercial vehicles to transport their own goods are put at a
competitive disadvantage to "professional hauliers".

In this regard, the Commission would also point to the decision of the
European Court of Justice in case number C-6/97 (Italian Republic v
Commission). Here the Italian Republic failed in its action seeking the
annulment of Commission Decision 97/270/EC of 22 October 1996 on a tax
credit scheme introduced by Italy for professional road hauliers.

In general terms, the scheme offered tax credits to Italian road hauliers and
compensatory payments for non-Italian Community hauliers to refund part of
their fuel costs. The effect of the scheme was to aid Italian road hauliers
operating for hire or reward by favouring them as compared with own-
account hauliers through a temporary exemption from a general system of
taxation.

The Commission considered that this constituted an exemption that was not
justified on the basis of the nature or general scheme of the system and
therefore was not a general measure. It adopted Decision 97/270/EC which
said that the scheme of aid in favour of professional road hauliers introduced
in the form of a tax credit was incompatible with the common market within

3

the meaning of Article 92(1) of the Treaty (now after amendment Article 87)
in so far as it met none of the conditions for exemption provided for in
Article 92(2) and (3).

The Italian Republic sought to have this decision annulled by the European
Court of Justice, however in its judgement of 19 May 1999, the Court ruled
that "the arguments alleging that the tax credit scheme is not in the nature of
aid must therefore be rejected".

The Commission recognises that the tax credit scheme and the excise duty
derogation requested by the Italian Government are of course not identical.
However, the derogation request would have exactly the same effect as the
tax credit scheme. It would upset the balance of competition between own-
account hauliers and hauliers for hire or reward by giving aid to only to the
latter category.

Furthermore, the Commission considers that the procedure proposed for the
refunding of the diesel excise duty increases to non-Italian hauliers appears
to create a new administrative burden on them and could also delay the
reimbursement
a
appropriate
of
discriminatory, adverse effect on them.

thereby

amount

having

tax

the

4.

Conclusion

Tax differentials in the transport sector can be acceptable under State Aid
rules if they are intended to ensure the attainment of agreed objectives under
the Common Transport Policy, including environmental objectives, and also
in Council Directive
respect
the minimum rates of excise duty set out
92/82/EEC. The Commission can therefore accept
the principle of tax
differentials that apply in a non-discriminatory way and seek to temporarily
compensate companies and help them adapt to additional costs that they have
to bear as a result of a shift in the tax system on environmental grounds.

the Commission does have fundamental objections to the
However,
application of this derogation request from Italy. Although it seeks to give
compensation to counter tax increases arising from a shift towards a more
environmentally friendly tax system, it applies only to road haulage operators
engaged in the transport of goods for third parties. It means that enterprises
that use their own diesel-powered commercial vehicles to transport their own
goods are put at a competitive disadvantage to hauliers operating for hire or
reward. This limitation introduces a discriminatory factor absent from other,
similar derogations granted by the Council to other Member States.

Furthermore, the Commission considers that the procedure proposed for the
refunding of the diesel excise duty increases to non-Italian hauliers appears
to create a new administrative burden on them and could also delay the
reimbursement
a
appropriate
of
discriminatory, adverse effect on them.

thereby

amount

having

tax

the

4

In view of these fundamental objections, the Commission requests that the
Council consider
the matter according to the third sub-paragraph of
Article 8(4) of Directive 92/81/EEC.

5