Proposal for a Council Decision amending Decision 2005/231/EC authorising Sweden to apply a reduced rate of taxation to electricity consumed by certain households and service sector companies in accordance with Article 19 of Directive 2003/96/EC
Date: 2006-05-08
Institutions: European Commission
Subjects: Sweden, derogation from EU law, electrical energy, environmental tax, household consumption, tax, tax on consumption, tax system

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 8.5.2006 
COM(2006) 198 final 

Proposal for a 

COUNCIL DECISION 

amending Decision 2005/231/EC  
authorising Sweden to apply a reduced rate of taxation to electricity consumed 
by certain households and service sector companies in accordance with Article 19 
of Directive 2003/96/EC 

(presented by the Commission) 

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EXPLANATORY MEMORANDUM 

1)  CONTEXT OF THE PROPOSAL 

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•  Grounds for and objectives of the proposal 

The  Swedish  energy  tax  levied  on  electricity  in  compliance  with  Council  Directive 
2003/96/EC1 is due in full by households and, in general, by companies in the service 
sector. 

Under Article 19(1) of Council Directive 2003/96/EC, the Council, acting unanimously 
on  a  proposal  from  the  Commission,  may  authorise  any  Member  State  to  introduce 
further exemptions or reductions in excise duties for specific policy considerations. 

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•  General context 

On 7 March 2005 by means of Council Decision 2005/231/EC2 Sweden was authorised 
under  Article  19  of  Council  Directive  2003/96/EC  to  implement  a  reduced  rate  of 
taxation  to  electricity  consumed  by  households  and  service  sector  companies  in  the 
north of Sweden. 

The state aid to service sector companies in the north of Sweden consisting in reduced 
rate of taxation on electricity was authorised by the Commission until the end of 20053. 
Therefore the authorisation granted by the Council was set to expire by the same date. 

By a letter dated 9 December 2005 the Swedish authorities applied to the Commission 
for an extension of the authorisation until 31 December 2011. At about the same time, 
namely  by  letter  dated  15  November  2005,  the  Swedish  authorities  notified  the 
Commission  according  to  Article  88(3)  of  the  Treaty  prolongation  of  the  regionally 
differentiated energy tax for the service sector4. 

Sweden  justifies  its  request  for  authorisation  under  Article  19  of  Council  Directive 
2003/96/EC for specific regional policy objectives. 

The  tax  differentiation  is  based  on  climate  considerations  and  aims  at  placing 
households  and  service  sector  companies  in  the  north  of  Sweden  at  an  equal  footing 
with such consumers in the southern parts of the country by way of reducing the costs 
of electricity for the consumers up north (where the electricity consumption needed to 
heat an average house in the northern parts of Sweden is deemed to be about 25 percent 
higher  than  in  the  south).  The  geographical  differentiation  has  been  made  on  an 
objective basis of information about mean temperatures during those parts of the year 

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OJ L 283, 31.10.2003, p. 51. Directive last amended by Directive 2004/75/EC, OJ L 157, 30.4.2004, p. 
100. 
OJ L 072, 18.03.2005, p. 27. 
State aid Case "C42/03 (ex-NN 3/B/2001) Sweden", OJ C 189 of 09.08.2003, p.6. 
State aid Case N 593/2005 Sweden "Prolongation of service sector's regionally differentiated energy tax 
on electricity". 

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when houses normally are heated. 

For  2006,  the  general  energy  tax  on  electricity  in  Sweden  is  SEK  0.261  (ca.  EUR 
0.0285)  per  kWh.  For  the  period  1  January  2006  until  31  December  2011  Sweden 
intends  to  apply  for  households  and  companies  in  the  service  sector  in  the  North  of 
Sweden a lower tax rate on electricity , which corresponds presently to SEK 0.201 (ca. 
EUR 0.022) per kWh, i.e. to 77% of the tax levied on electricity in the remaining part 
of the country.  

Sweden  considers  that  the  tax-induced  incentive  to  increase  energy  efficiency  is 
maintained. 

The annual budgetary expenditure related to the tax reduction is anticipated to be SEK 
146 million (16 million euros). 

The  measure  is  granted  in  the  form  of  a  reduced  energy  tax  rate.  The  effect  of  the 
reduced tax rate is given directly, when the tax is levied. The chargeable event occurs 
at the time of supply to the consumer by the distributor of the electricity. 

The measure is to be terminated by 31 December 2011. 

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•  Existing provisions in the area of the proposal 

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

Council  Decision  of  7  March  2005  authorising  Sweden  to  apply  a  reduced  rate  of 
taxation to electricity consumed by  households and service  sector companies situated 
in  certain  areas  in  the  north  of  Sweden  in  accordance  with  Article  19  of  Directive 
2003/96/EC. 

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•  Consistency with the other policies and objectives of the Union 

Under Article 19(1) of Council Directive 2003/96/EC, the Council, acting unanimously 
on  a  proposal  from  the  Commission,  may  authorise  any  Member  State  to  introduce 
further exemptions or reductions in excise duties for specific policy considerations. 

Each  request  must  be  examined  by  the  Commission  taking  into  account  the  proper 
functioning of the internal market, the need to ensure fair competition and Community 
health, environment, energy and transport policies. 

The  differentiation  places  households  and  service  sector  companies  in  the  north  of 
Sweden at an equal footing with such consumers in the southern parts of the country by 
way  of  reducing  the  costs  of  electricity  for  the  consumers  up  north.  Therefore,  the 
measure has regional and cohesion policy objectives.  

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In compliance with Article 13 of Council Directive 2003/96/EC the calculation into EUR for 2006 is 
based  on  the  exchange  rate  obtained  on  the  first  working  day  of  October  2005  and  published  in  the 
Official Journal of the European Union (1 EUR = 9.3086 SEK). 

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The reduced level of taxation on electricity for consumption in the north of Sweden (22 
euros  per  MWh)  remains  much  higher  than  the  Community  minimum  rate  set  out  in 
directive  2003/96/EC  (1  euro  per  MWh  for  non  business  use).  Furthermore,  the  tax 
reduction  will  be  proportionate  to  the  extra  heating  costs  borne  by  households  and 
service  sector  companies  in  northern  Sweden  (cf.  Article  1  (2)  of  Decision 
2005/231/EC). Consequently, the Commission is of the view that this tax level insures 
that the incentive effect of taxation to increase energy efficiency is maintained.  

Article  19(2)  of  Directive  2003/96/EC  provides  that  measures  adopted  under  its 
provisions  must  be  limited  in  time,  and  sets  a  maximum  period  of  6  years,  with  a 
possibility  of  renewal.  At  the  present  stage,  it  appears  appropriate  to  renew  the 
authorisation for six years and thus to extend the application of Decision 2005/231/EC 
accordingly. 

It  should  be  ensured  that  the  authorisation  under  Decision  2005/231/EC,  granted  for 
similar  reasons  but  for  a  short  period,  continues  to  apply,  without  creating  a  gap 
between  the  expiry  of  that  decision  and  the  adoption  of  the  proposed  draft  decision. 
The  present  evaluation  is  without  prejudice  to  the  outcome  of  the  state  aid  case  N 
593/2005. 

2)  CONSULTATION OF INTERESTED PARTIES AND IMPACT ASSESSMENT 

•  Consultation of interested parties 

The  proposal  contains  a  prolongation  of  an  existing  derogation,  which  only  concerns 
Sweden. 

•  Collection and use of expertise 

There was no need for external expertise. 

•  Impact assessment 

Non applicable. 

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3)  LEGAL ELEMENTS OF THE PROPOSAL 

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•  Summary of the proposed action 

On the basis of the above and without prejudice to the outcome of the sate aid case N 
593/2005,  Commission  proposes  to  extend  the  validity  of  Council  Decision 
2005/231/EC until 31 December 2011 authorising thereby Sweden to apply a reduced 
rate of taxation on electricity consumed by households and service sector companies in 
the North of Sweden. 

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•  Legal basis 

Article 19 of Council Directive 2003/96/EC. 

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320 

•  Subsidiarity principle 

The  subsidiarity  principle  applies  insofar  as  the  proposal  does  not  fall  under  the 
exclusive competence of the Community. 

The  objectives  of  the  proposal  cannot  be sufficiently  achieved  by  the  Member  States 
for the following reason(s). 

With  Council  Directive  2003/96/EC  the  EU  laid  down  harmonized  provisions  for 
taxation of energy products and electricity. Any changes to these provisions require a 
Community act of legislation and can not be subject of a Member States decision. 

The proposal therefore complies with the subsidiarity principle. 

•  Proportionality principle 

The proposal complies with the proportionality principle for the following reason(s). 

The proposal complies with the proportionality principle because it intends to modify a 
Council decision. 

The measure does not imply financial and administrative burden for the Community. 

•  Choice of instruments 

Proposed instruments: other. 

Other means would not be adequate for the following reason(s). 

The proposal complies with the proportionality principle because it intends to modify a 
Council decision. 

4)  BUDGETARY IMPLICATION 

The proposal has no implication for the Community budget. 

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Proposal for a 

COUNCIL DECISION 

amending Decision 2005/231/EC  
authorising Sweden to apply a reduced rate of taxation to electricity consumed 
by certain households and service sector companies in accordance with Article 19 
of Directive 2003/96/EC 

(Only the Swedish text is authentic) 

THE COUNCIL OF THE EUROPEAN UNION, 

Having regard to the Treaty establishing the European Community, 

Having  regard  to  Council  Directive  2003/96/EC  of  27  October  2003  restructuring  the 
Community framework for the taxation of energy products and electricity,6 and in particular 
Article 19(1) thereof, 

Having regard to the proposal from the Commission, 

Whereas: 

(1) 

(2) 

(3) 

By Council Decision 2005/231/EC7 Sweden was authorised to apply a reduced rate of 
taxation to electricity consumed by certain households and service sector companies in 
accordance  with  Article  19  of Directive  2003/96/EC.  That  authorisation  was  limited 
until  31.  December  2005.  By  letter  dated  9  December  2005,  the  Swedish  authorities 
applied to the Commission for an extension of the authorisation, until the end of 2011. 

In  the  northern  parts  of  the  country,  electricity  consumption  for  heating  purposes  is 
higher than elsewhere in the country, the difference being 25 % at present. Therefore, 
a  reduced  energy  tax  rate  has  been  applied  in  Sweden  to  electricity  used  in  the 
northern  parts  of  the  country  since  July  1981.  The  percentage  of  the  reduction  as 
compared to the normal rate has however declined since that time.  

By reducing the costs of electricity for households and service sector companies in the 
north of Sweden those consumers are placed on an equal footing with such consumers 
in the southern parts of the country. Therefore, the measure has regional and cohesion 
policy objectives. 

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OJ L 283, 31.10.2003, p. 51, Directive as last amended by Directive 2004/75/EC (OJ L 157, 30.4.2004, 
p. 100). 
OJ L 72, 18. 3. 2005, P. 27. 

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(4) 

The reduced level of taxation on electricity for consumption in the north of Sweden, 
which  amounts  presently  to  22  euros  per  MWh,  remains  much  higher  than  the 
Community  minimum  rate  set  out  in  Directive  2003/96/EC.  Furthermore,  the  tax 
reduction should remain proportionate to the extra heating costs borne by households 
and service sector companies in northern Sweden. That level of taxation should ensure 
that the incentive effect of taxation to increase energy efficiency is maintained. 

(5) 

The  scheme  has  been  reviewed  by  the  Commission  and  been  found  not  to  distort 
competition  or  hinder  the  operation  of  the  internal  market  and  it  is  not  considered 
incompatible with Community policy on the environment, energy and transport. 

(6)  Without  prejudice  to  the  outcome  of  the  state  aid  case  N  593/2005  Sweden 
"Prolongation of service sector's regionally differentiated energy tax on electricity", it 
is  therefore  appropriate  to  renew,  in  accordance  with  the  terms  of  Article  19(2)  of 
Directive 2003/96/EC, the authorisation for Sweden to apply a reduced rate of taxation 
to electricity for consumption in the north of Sweden, until 31 December 2011. 

(7) 

Decision 2005/231/EC should therefore be amended accordingly. 

(8) 

It  should  be  ensured  that  the  authorisation  under  Decision  2005/231/EC,  granted  for 
similar  reasons  but  for  a  short  period,  continues  to  apply,  without  creating  a  gap 
between the expiry of that Decision and the taking effect of this Decision,  

HAS ADOPTED THIS DECISION: 

In Article 2 of Decision 2005/231/EC the date "31 December 2005" is replaced by the date 
"31 December 2011". 

Article 1 

This Decision shall apply from 1. January 2006. 

Article 2 

Article 3 

This Decision is addressed to the Kingdom of Sweden. 

Done at Brussels, 

For the Council 
The President 

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