Proposal for a Council Directive amending Directive 2003/96/EC as regards the adjustment of special tax arrangements for gas oil used as motor fuel for commercial purposes and the coordination of taxation of unleaded petrol and gas oil used as motor fuel {SEC(2007) 170} {SEC(2007) 171}
Date: 2007-03-13
Institutions: European Commission
Subjects: diesel fuel, fuel tax, lead-free petrol, motor fuel, tax system

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 13.3.2007 
COM(2007) 52 final 

2007/0023 (CNS) 

Proposal for a 

COUNCIL DIRECTIVE 

amending Directive 2003/96/EC as regards the adjustment of special tax arrangements 
for gas oil used as motor fuel for commercial purposes and the coordination of taxation 
of unleaded petrol and gas oil used as motor fuel 

(presented by the Commission) 

{SEC(2007) 170} 
{SEC(2007) 171} 

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EXPLANATORY MEMORANDUM 

CONTEXT OF THE PROPOSAL 

•  Grounds for and objectives of the proposal 

The White Paper on Transport European transport policy for 2010: time to decide1, noted that 
with the road transport sector now fully opened up to competition, the absence of harmonised 
fuel  taxes  seemed  increasingly  to  be  an  obstacle  to  the  smooth  functioning  of  the  internal 
market.  It  concluded  on  this  issue  by  stressing  the  need  to  make  the  tax  system  more 
consistent by proposing uniform taxation for commercial road transport fuel in order to round 
off  the  internal  market.  However,  it  has  subsequently  become  apparent  from  a  political  and 
economical  point  of  view,  that  full-fledged  harmonization  of  the  duty  applicable  to 
commercial gas oil is not an adequate answer. 

It should be recalled that an initial proposal relating to the taxation of commercial gas oil (or 
more commonly known as "commercial diesel"2) was presented in 20023. This proposal was 
withdrawn  in  the  context  of  the  screening  of  legislative  proposals  pending  before  the 
legislator4. However, the Commission also announced its intention to reconsider the need for 
legislative intervention in the light of the results of a comprehensive impact assessment. 

In its recent Communication to the Council and the European Parliament - COM(2006) 314, 
22.6.2006, Keep Europe moving – Sustainable Mobility for our continent, Mid-term review of 
the European Commission's 2001 Transport White Paper - the Commission noted that it "will 
examine  how  excessive  differences  in  fuel  tax  levels  can  be  narrowed".  It  also  stressed  that 
"transport policy is closely intertwined with energy policy, on the basis of common objectives: 
lowering CO2 emissions and reducing EU import dependency on fossil fuels"5 and underlined 
that  "international  environmental  commitments,  including  those  under  the  Kyoto  Protocol, 
must be integrated into transport policy".  

The  Communication  of  the  Commission  -  COM(2006)  545,  Action  Plan  for  Energy 
Efficiency: Realising the Potential - confirmed the intention of the Commission to propose in 
2007  special  tax  arrangements  for  commercial  gas  oil,  aiming  at  narrowing  excessive 
differences in tax levels between Member States, in order to increase energy efficiency in the 
transport haulage by reducing "fuel tourism". 

Consequently,  this  proposal  aims  first  of  all  to  reduce  the  distortions  of  competition 
related to excise differentials which affect haulage markets. In so doing, it will also foster 
growth, jobs and competitiveness, notably by enabling the advantages of a single market 
to be fully exploited. Secondly, the proposal meets common transport policy objectives 
and  will  provide  better  protection  for  the  environment.  Finally,  it  is  clearly  consistent 

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2 

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4 
5 

COM(2001) 370, 12.9.2001. 
The  expression  commercial  gas  oil  was  chosen  since  it  corresponds  to  the  official  designation  in  the 
relevant CN codes. 
Proposal for a Council Directive amending Directive 92/81/EEC and Directive 92/82/EEC to introduce 
special tax arrangements for gas oil fuel used for commercial purposes and to align the excise duties on 
petrol and gas oil fuel - COM(2002) 410, 24.7.2002. 
COM(2005) 462, 27.9.2005. 
European Council, 23-24 March 2006. 

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with the general principles on excise duty set out in the Commission’s communication, 
Tax policy in the European Union - Priorities for the years ahead6. It is submitted without 
prejudice to the conclusions of the mid-term review of the Energy Tax Directive due in 
2008. 

•  General context 

Fuel (including  taxes)  represents on average between 20 and 30% of the  running costs of a 
road haulage business. As excise duty represents between 30 and 60% of the pump price of 
gas  oil  fuel  (excluding  VAT),  this  duty  accounts  for  between  6%  and  18%  of  the  running 
costs  of  a  road  haulage  business.  At  present  in  a  liberalised  market,  where  competition  is 
stiffer, differences  in  operating  costs  resulting  from national taxes  and  levies have a greater 
impact. 

The  reason  is  simple:  big  trucks  have  tanks  of  huge  capacity,  which  allow  them  to  cover 
between  1 500  and  3 000  kilometres  on  a  single  tank.  That  means  in  reality  that  hauliers 
involved in international activities or located near the border of a low taxing country conduct 
a kind of fiscal planning, known as fuel tourism: they take advantage of the very significant 
differences in national excise duties on gas oil fuel by filling up in Member States with the 
lowest taxes.  

The  first  negative  consequence  is  that  tax-planning  behaviour  creates  distortions  of 
competition  on  haulage  markets  to  the  extent  that  all  operators  do  not  enjoy  the  same 
possibilities of purchasing low taxed fuel, due to the range of their trucks, the scope of their 
activity  or  the  distance  from  their  main  location  to  the  border  of  a  low-taxing  country. 
Because  of  the  stiff  competition  on  the  haulage  market,  the  distortions  of  competition 
described above have consequences in terms of national market shares. A study on bilateral 
road  transport7  carried  out  by  the  French  Transport  Ministry  noted  important  changes  in 
market shares on the European market between 1997 and 2001. Operators from Luxemburg or 
Austria  have,  for  example,  increased  their  market  shares  over  most  of  their  competitors 
whereas the United Kingdom registered a loss on all markets. It determined that two thirds of 
the  variations  observed  between  1997  and  2001  can  be  attributed  to  three  factors:  tax 
differences on gas oil, differences in corporate tax and the evolution of salaries between two 
given countries. Tax differences for gas oil appear to be the main factor explaining by itself 
40 % of the market share variations observed.  

The other negative consequences of fuel tourism are the impact on the environment in case 
of detours. As rational operators, drivers will make use of the gas oil price difference as much 
as they can and tank in the Member State where it is the cheapest. In so doing they would also 
take  into  account  the  additional  costs  involved  (road  charges,  fuel  and  time  spent,  risks 
encountered on the road such as congestion and accidents...). Cases where operators simply 
use  the  opportunity  to  tank  "en  route",  without  making  any  detours  mainly  amount  to  a 
shifting  of  consumption  that  would  in  any  event  have  taken  place  in  one  Member  State  or 
another, although there are also some additional consumption (and emissions) since reduced 
fuel costs due to tax avoidance stimulate demand. In contrast, when drivers make deliberate 

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7 

COM(2001) 260, 23.5.2001. 
BIPE  (2005),  Evaluation  des  conséquences  de  la  hausse  du  prix  du  gazole  sur  les  entreprises  de 
transport routier de marchandises, Etude réalisée pour le Ministère des Transports, de l'Équipement, du 
Tourisme et de la Mer.  

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detours  from  their  routes  to  take  advantage  of  the  differences  in  national  excise  duties,  this 
has a net negative effects on the environment because of the longer distance driven. 

Concerning  detours,  Michaelis  (2003)8  showed  that  Germans  are  willing  to  drive  2  to  4 
additional  kilometres  for  each  Euro  cent  price  differential  compared  to  a  neighbouring 
country in the case of gas oil. Given the existing 2003 price differentials between Germany 
and its neighbours, this relates to an average distance of about 30 to 35 additional kilometres. 
A 1990 study concerning the Netherlands established that with a price difference of 0.14-0.16 
ECU per litre compared to Belgium and Germany, 10 million extra kilometres were driven to 
refuel across the border9. 

Fuel  tourism  finally  leads  to  losses  in  budgetary  resources  for  those  Member  States 
applying a relatively high excise duty on gas oil. In Germany, the Schmid Traffic Service 
GmbH estimated that the tax loss from excise duties on mineral oils in 2004 resulting from 
fuel tourism (i.e. professional gas oil) was € 1 915 000 000. The total loss is even higher and 
amounts  to  € 3.6  billion  each  year  (besides  excise  duties  on  mineral  oils,  it  comprises 
additional losses in VAT and excise duties on cigarettes, because of the reduced tax revenues 
from VAT and the reduced amounts of cigarettes sold at filling stations). 

•  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 (the Energy Tax Directive or ETD)10 lays 
down the taxable products concerned, the uses that make them liable to tax and the minimum 
levels of taxation applicable to each product depending on whether it is used as propellant, for 
certain industrial and commercial purposes or for heating. To take gas oil and unleaded petrol, 
only  the  structure  of  excise  duties  is  harmonised  across  the  Community,  according  to  the 
following minimum levels: 

In euros per 1000 l 

1 January 2004 

1 January 2010 

Unleaded petrol 

Gas oil (diesel) 

359 

302 

359 

330 

The ETD also gives the possibility to Member States to create a specific level of taxation for 
commercial gas oil (decoupling), provided that the minimum levels are observed and that the 
rate  for  commercial  gas  oil  does  not  fall  below  the  national  level  of  taxation  in  force  on 
1 January 2003.  

In  case  they  wish  to  set  the  commercial  gas  oil  rate  below  the  national  level  of  taxation  in 
force  on  1  January  2003,  Article  7(4)  of  the  ETD  enables  them  to  do  so  -  provided  the 
minimum levels are respected - by introducing road user charges, as long as the overall tax 
burden remains broadly equivalent. However, this possibility is in practice solely opened for 
the United Kingdom, since it is the only Member States verifying the additional requirement 

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10 

Michaelis (2003) Tanktourismus – eine Szenarioanalyse, In Zeitschrift für Verkehrswissenschaft. 
Effects  at  the  border  of  a  petrol  tax  increase  on  1  January  1990,  P.  M.  Blok  and  A.  P.  Muizer, 
Nederlands Economisch Instituut, TK 1990-1991, 21.665 Nr 3, Rotterdam. 
OJ L 283, 31.10.2003, p. 51, as last amended by Directive 2004/75/EC (OJ L 157, 30.4.2004, p. 100). 

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according to which the national level of taxation in force on 1 January 2003 for gas oil used as 
propellant  has  to  be  at  least  twice  as  high  as  the  minimum  level  of  taxation  applicable  on 
1 January 2004. 

This final requirement has been particularly distorting since it inhibited tax policy interaction 
among  Member  States  to  lead  to  a  reduction  in  tax  divergences.  For  the  Member  States 
(except  the  United  Kingdom)  taxing  above  the  minimum  in  2003,  the  only  possibility  at 
present to decouple is by increasing the rate applied to non-commercial traffic. Other things 
being  equal,  this  cannot  help  reduce  the  existing  differences  between  Member  States  in 
commercial  gas  oil  rates  and  will  only  increase  the  differences  in  non-commercial  gas  oil 
rates, which might in turn increase tank tourism made by private cars. For the already high-
taxing countries in 2003 there is in reality no room for manoeuvre in order to reduce the 
existing distortions under the current provisions.  

•  Consistency with other policies and objectives of the Union 

To  do  more  to  confront  transport  users  with  real  costs  and  to  change  price  structures,  the 
White  Paper  European  transport  policy  for  2010:  time  to  decide,  indicates  two  additional 
actions: 

–  the  harmonization  of  the  minimum  clauses  in  contracts  governing  transport  activity  in 

order to allow tariffs to be revised should costs increase (e.g. a fuel price rise), and 

–  the  definition  of  common  principles  for  charging  for  infrastructure  use  covering  the 

different transport modes. 

The  first  action  was  assessed  by  a  comprehensive  impact  assessment  in  2005.  While  five 
alternative policy options were identified11, a first assessment lead to further analyses on the 
basis  of  three  main  orientations:  i)  amendment  to  Regulation  (EEC)  No  4058/8912,  ii)  no 
policy change, iii) harmonisation of fuel taxes with minimum contract clauses. The results of 
the impact assessment confirmed to the Commission the need to make a proposal to modify 
special tax arrangements for gas oil fuel used for commercial purposes.  

Secondly, on infrastructure charges, the Commission is required to present by June 2008, after 
examining  all  options  including  environment,  noise,  congestion  and  health-related  costs,  a 
generally applicable framework for the assessment of external costs for all modes of transport 
to  serve  as  the  basis  for  future  calculations  of  infrastructure  charges13.  This  proposal  takes 
account  of  possible  future  developments  of  infrastructure  charges,  since  it  offers  more 
flexibility for the implementation by Member States of both excise duties and road charges, 
while avoiding double taxation and without imposing additional burdens on operators.  

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13 

No  policy  change,  amendment  to  Regulation  (EEC)  No  4058/89,  harmonisation  of  fuel  taxes, 
introduction  of  price  insurances,  and  adequate  regulation  that  works  as  an  obstacle  to  outsourcing 
practices. 
Council Regulation (EEC) No 4058/89 of 21 December 1989 on the fixing of rates for the carriage of 
goods by road between Member States (OJ L 390, 30.12.1989, p. 1). 
Article  11  of  Directive  1999/62/EC  on  the  charging  of  heavy  goods  vehicles  for  the  use  of  certain 
infrastructures (OJ L 187, 20.7.1999) as amended by Directive 2006/38/EC (OJ L 157, 9.6.2006, p. 8). 

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CONSULTATION OF INTERESTED PARTIES AND IMPACT ASSESSMENT 

•  Consultation of interested parties 

Consultation methods, main sectors targeted and general profile of respondents 

A written questionnaire was published on the Commission's website on 20 July 2006 in order 
to invite the public to provide input to the discussion, gather relevant feedback and assist the 
Commission in developing its policy concerning commercial gas oil. Comments were invited 
by 30 September 2006. In parallel, the Commission sent more detailed questionnaires to the 
representatives  of  the  main  stakeholders  (road  transport  associations  (both  international  and 
national),  car  industry  associations  and  petroleum  industry  associations).  A  total  of  52 
external  contributions  were  received  in  response  to  the  consultation.  Of  that,  37  were  from 
national  federations  or  associations,  7  were  from  European  or  international  bodies,  7  were 
from business and one was from a private citizen. The main industry sector that reacted to the 
consultation  was  the  haulage  sector,  which  accounted  for  more  than  half  of  the  responses. 
Tank (or service) stations and petroleum industry participation amounted to more than 10% of 
the responses. Other sectors, such as automobile industry, maritime ports, handcraft operators 
and railway firms also participated. 

Summary of responses and how they have been taken into account 

The haulage industry warmly welcomed the Commission initiative. The great majority of the 
hauliers support a change to the current situation. The preferred option is total harmonisation 
in the nearest possible future (2018 seems too far away) and, if possible, at a lower level. In 
case  this  option  is  not  realistic,  they  could  accept  an  enhanced  approximation  as  an  interim 
solution towards harmonisation or as a second best option.  

The representatives of the automobile industry acknowledged that the current situation is not 
satisfactory  from  an  internal  market  perspective.  However,  they  are  not  convinced  that  the 
magnitude  of  the  problems  is  such  that  it  warrants  a  change  to  fuel  taxation  systems.  They 
would prefer the no-change option to any of the other proposed options.  

At European level, representatives of the petroleum industry have adopted a neutral stance on 
the  proposed  options.  However,  when  located  in  high-taxing  countries,  tank  stations 
representatives support enhanced approximation or, even preferably, total harmonisation. 

The Commission took the responses into account. 

•  Collection and use of expertise 

Beyond  the  comprehensive  consultation  of  interested  parties  in  the  impact  assessment, 
position  papers  and  articles  have  been  taken  into  account.  In  addition,  the  Commission  has 
used  the  results  of  three  models  in  order  to  assess  the  impacts  (Tremove,  IPTS  transport 
technologies model (Poles) and TRANSTOOLS). 

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IMPACT ASSESSMENT 

In order to examine how the problem of differences in commercial gas oil tax levels can be 
addressed, the Commission began by assessing three basic approaches.  

The first approach (option A) consists of not intervening further at Community level (the no 
policy  change  option).  It  will  not  solve  the  problem  of  distortions  of  competition  currently 
existing  on  the  haulage  market,  which  has  consequences  in  terms  of  market  shares  and 
employment (increase in low-taxing Member States to the detriment of high-taxing Member 
States). Option A will not address the problem of detours, which resulted in consumption of a 
total of 42 500 million litres fuel between 2007 and 2030 and related pollutant emissions (2.2 
million tons of CO2). It was therefore not an option that the Commission chose to pursue. 

The second option (option B) consists of programming full harmonisation between Member 
States of excise duties on commercial gas oil. In 2018, the single level would be € 400/1000 l. 
Moreover, the unleaded petrol tax rate would not be less than the rate applied to commercial 
gas  oil.  Full  harmonisation  is  the  option  that  allows  maximum  reduction  in  distortions  of 
competition, without increasing the administrative costs too much. Nevertheless,  this option 
would oblige 22 Member States to increase their excise duty for commercial gas oil to reach 
the  level  of  € 400/1000  l  and  5  Member  States  to  reduce  their  duty  rates.  It  will  lead  to  an 
increase in the rate  for  unleaded petrol for 9 Member  States  from  2014  and  may  lead  to  an 
increase  in  non-commercial  excise  duty  in  two  Member  States  (in  case  Germany  and  the 
United  Kingdom  decided  to  compensate  the  important  decrease  in  commercial  rate  by  an 
increase in the non-commercial rate). This option will be neutral for the car industry. From an 
environmental  point  of  view,  option  B  leads  to  a  small  increase  in  gas  oil  consumption,  a 
small  decrease  in  consumption  of  unleaded  petrol  and  a  very  small  increase  in  pollutant 
emissions (in case fuel tourism is not taken into account). However, since it is the option that 
reduces  the  detours  to  the  greatest  extent,  it  is  also  the  one  that  reduces  to  their  minimum 
levels  the  related  CO2  emissions  (0.1  million  tons),  pollutants  and  tax  avoidance.  From  a 
social point of view, this is the option that might have the largest impact (although it is likely 
to  remain  modest),  with  less  congestion  and  accidents  on  the  roads,  less  working  hours  for 
drivers  and  the  largest,  although  modest,  employment  shifts  at  regional/national  levels. 
Nevertheless,  option  B  will  have  the  greatest  negative  impact  on  budgets  (-€ 71.8  billion 
between 2007 and 2030, reduced to -€ 58,2 billion if the reduction in fuel tourism is taken into 
account). It was also considered not to be realistic from a political point of view. For all these 
reasons, this option was not pursued by the Commission. 

The  third  option  (option  C)  consists  of  the  enhanced  approximation  of  excise  duties 
applicable to commercial gas oil. A fluctuation band would be set at Community level, with a 
minimum  and  a  maximum  tax.  Member  States  would  have  to  set  the  level  of  taxation 
applicable to commercial gas oil within the band. The width of the fluctuation band should be 
progressively  reduced  to  reach  € 100  by  2010.  In  order  to  give  time  to  Member  States 
benefiting  from  transitional  periods  to  adapt,  option  C  retains  the  current  minimum  levels 
fixed  by  the  ETD  as  the  base  line  of  the  fluctuation  band  until  2013.  Subsequently,  two 
further sub-options were assessed: (i) from 1 March 2013, the band would be indexed (option 
C1)  or  (ii)  the  band  would  remain  stable,  but  would  take  a  higher  minimum  level  than  that 
currently fixed in the Energy Tax Directive i.e. € 359 per 1000 litres, the same minimum level 
that applies to unleaded petrol (option C2). In options C1 and C2, the unleaded petrol national 
tax rate would not be less than the national rate applied to commercial gas oil. The impact 

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assessment  showed  that  each  of  these  variations  of  option  C  has  disadvantages.  It  was 
thus considered appropriate to bring forward to 2012 the date of implementation of indexation 
(option C1) and of equalization with unleaded petrol (C2) and to add a fifth option (C2+), in 
the  light  of  the  results  of  public  consultation and of econometric simulations.  In  all  three C 
sub-options, those Member States benefiting from transitional periods will have to respect the 
new rates only when their transitional period has expired. 

Option C2+ consists of increasing the minimum level for gas oil to € 359/1000 l in 2012, 
and subsequently to € 380 in 2014, in order to avoid a rapid erosion of the tax rate in real 
terms and to reduce the distortions of competition even further. Option C2+ does not include a 
fluctuation band and thus no maximum level. As for options C1 and C2, the unleaded petrol 
national tax rate would not be less than the national rate applied to gas oil.  

In  addition,  in  order  to  be  consistent  with  other  Community  policies,  to  facilitate  the 
implementation  of  decoupling  and  to  enable  the  reduction  of  tax  differences  in  practice, 
options C1, C2 and C2+ envisage to modify Article 7(4) of the ETD and provide that Member 
States,  which  apply  or  introduce  a  system  of  road  user  charges  for  motor  vehicles  using 
commercial gas oil, may apply a rate to gas oil used by such vehicles lower than the national 
level of taxation in force on 1 January 2003, as long as the overall tax burden remains broadly 
equivalent, and provided that the Community minimum level applicable to commercial gas oil 
is observed. The requirement set out in Article 7(4) whereby the national level of taxation in 
force on 1 January 2003 for gas oil used as propellant must be at least twice as high as the 
minimum level of taxation applicable on 1 January 2004 would not be maintained. 

Assessment of options C: 

Option  C1  and  option  C2  imply  an  increase  in  gas  oil  excise  duty  in  18  Member  States  by 
2014, against 21 in option C2+. Whereas option C2 will have no influence on unleaded petrol 
excise duties, C1 and C2+ will lead to an increase in unleaded petrol excise duty in 9 Member 
States, from 2016 (C1) and 2014 (C2+). Since it does not include a fluctuation band and thus 
no  maximum  level,  option  C2+  should  have  no  influence on non-commercial gas oil excise 
duty.  All  three  options  will  allow  reductions  in  distortions  of  competition.  All  things  being 
equal, since the minimum level of taxation for commercial gas oil increases more under C1 
than under C2 in the long run, C1 will allow reductions in differences to occur to a greater 
extent than under C2. In C2+, the amount of the reduction would depend on the reactions of 
the  currently  high-taxing  Member  States.  In  case  they  decide  to  reduce  their  rate  and 
introduce  road  charges,  the  reduction  in  taxation  differences  will  also  be  greater  than  that 
obtained under C2, thanks to the  higher minimum level.  Administrative costs will be of the 
same order as in option B and do not seem to be an issue that preoccupies the industry. The 
impact on the car industry, measured in terms of unleaded petrol and gas oil vehicles stock, 
appear  to  be  very  small  under  all  options.  None  of  the  options  should  have  a  significant 
impact  on  transport  demand  or  on  modal  shift.  They  could  all  have  small  positive  social 
effects, in terms of reduction in congestion, accidents and working hours of drivers, but to a 
lesser  extent  than  under  option  B  which  indeed  is  liable  to  reduce  detours  to  the  greatest 
possible  extent.  In  terms  of  employment,  all  these  options  could  lead  to  some  shift  at 
regional/national level, but no change should be observed at European level, all other things 
being equal. 

The  biggest  differences  between  these  three  options  concern  fuel  consumption,  the 
environmental impact, impact on fuel tourism and the budgetary impact. Whereas options C1 
and  C2  lead  to  small  increases  in  gas  oil  consumption  and  decreases  in  consumption  of 

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unleaded petrol (given the upper limit to gas oil taxation), C2+ is the only option that enables 
both gas oil and unleaded petrol consumption to be reduced. From an environmental point of 
view, C2+ contributes more to the internalisation of externalities than C2, since its minimum 
levels  are  higher.  Without  taking  fuel  tourism  into  account,  C2+  is  the  only  option  that 
reduces pollutants in the air. Fuel tourism and the related pollutant emissions will be reduced 
in  all  three  options  (to  the  greatest  extent  in  option  C1  with  0.6  million  tons  emissions).  In 
option  C2+,  fuel  tourism  could  be  reduced  to  a  lower  level  than  under  C1  in  the  event  that 
Germany  and  the  United  Kingdom  (Member  States  presenting  the  highest  gas  oil  taxation 
levels at the moment) decide to lower their commercial rate through the introduction of road 
user  charges.  From  a  budgetary  point  of  view,  the  total  budgetary  impact  (e.g.  taking  into 
account  the  reductions  of  fuel  tourism)  will  be  respectively  -€ 38,3  billion  (C1),  -€ 46,8 
billion  (C2)  and  +€ 40,3  billion  (C2+).  For  all  the  above  mentioned  reasons,  the 
Commission has decided to propose option C2+. 

LEGAL ELEMENTS OF THE PROPOSAL 

•  Summary of the proposed action 

This new proposal will modify the Energy Tax Directive by increasing the minimum levels of 
taxation  for  gas  oil  set  at  Community  level.  From  2012  onwards  the  minimum  level  of 
taxation would be identical to the minimum level that will already be applicable to unleaded 
petrol (€ 359/1000 l), in order to reflect the fact that these two fuels are similarly detrimental 
to the environment. From 2014 onwards, the minimum level of taxation for gas oil would be 
increased (€ 380/1000 l), in order to avoid an important erosion in its value in real terms and 
to reduce distortions further.  

Decoupling of the duty on commercial and non-commercial gas oil should be optional but not 
obligatory. For Member States which differentiate between commercial and non-commercial 
use of gas oil used as propellant, it should be clarified that the national level of taxation for 
non-commercial gas oil used as propellant shall not be less than the national level applied by 
that Member State to commercial gas oil. The same should apply to the relationship between 
unleaded petrol and commercial gas oil.  

To make the mechanism clearer with an example, for a Member State already respecting the 
minimum levels applicable in 2010 and taxing commercial gas oil at € 340 per 1000 l, non-
commercial gas oil at € 350 per 1000 l and unleaded petrol at € 370 per 1000 l, the proposal 
will have the following incidence:  

– 

– 

in  2012,  the  commercial  gas  oil  rate  will  be  raised  to  € 359  per  1000 l.  The  non-
commercial  gas  oil  rate  must  therefore  be  equal  or  greater  than  € 359  per  1000 l. 
Otherwise,  non-commercial  gas  oil  would  be  treated  more  favourably  than 
commercial  gas  oil,  whereas  no  environmental  reason  or  distortion  of  competition 
justifies  such  favourable  treatment.  This  increase  will  have  no  incidence  on  the 
taxation of unleaded petrol, since the new minimum level for commercial gas oil is 
from 2012 on the same minimum as for unleaded petrol.  

in 2014, the commercial gas oil minimum level will be increased to € 380 per 1000 l. 
The  non-commercial  gas  oil  rate  will  have  to  be  equal  to  or  greater  than  € 380  per 

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1000 l. The unleaded petrol rate will also have to be equal to or greater14 than € 380 
per 1000 l. Again, these changes are a consequence of the increase in the commercial 
gas oil rates. Non-commercial gas oil and unleaded petrol would otherwise be treated 
more  favourably  than  commercial  gas  oil,  whereas  no  environmental  reason  or 
distortion of competition justifies such favourable treatment.  

Type of fuel 

Commercial gas oil 

Non-commercial gas oil 

Unleaded petrol 

2010 

340 

350 

370 

2012 

359 

≥ 359 

370 

2014 

380 

≥ 380 

≥ 380 

Furthermore, the text proposed would enable all Member States to reduce their taxation levels 
below  their  1  January  2003  level,  provided  they  respect  the  minimum  level  of  taxation  and 
provided they apply or introduce a system of road user charges, so that the overall tax burden 
remains  broadly  equivalent  (cf.  above  description  of  option  C2+).  Thereby,  more  Member 
States  will  be  able  to  decouple  commercial  and  non-commercial  gas  oil  by  maintaining  the 
non-commercial rate constant and decreasing their commercial rate. 

Transitional periods granted in Directives 2003/96/EC, as amended by Directives 2004/74/EC 
and 2004/75/EC and in the Treaty concerning the accession of the Republic of Bulgaria and 
Romania  to  the  European  Union  will  be  maintained  and  supplemented.  In  this  regard,  for 
Member  States  benefiting  from  transitional  periods,  increases  should  take  place  every  two 
years, that is to say that the increase to € 359 will take place two years after the end of the 
transitional period within which € 330 had to be reached and the increase to € 380 will take 
place two years after the end of the previous two-year period. 

Finally, the commercial gas oil tax rate would be applied at Member State level by means of a 
refund mechanism, the practicalities of which would be defined at Community level. A refund 
system seems the only practical way to avoid discrimination against non-established traders. 

•  Legal basis 

Article 93 of the EC Treaty. 

•  Subsidiarity principle 

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

Article  93  of  the  Treaty  laies  down  that  the  Council  will  adopt  provisions  for  the 
harmonisation of legislation concerning excise duties to the extent that such harmonisation is 
necessary to ensure the establishment and the functioning of the internal market. 

14 

The  expression  commercial  gas  oil  was  chosen  since  it  corresponds  to  the  official  designation  in  the 
relevant CN codes. 

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As stated in the impact assessment, enhanced approximation of tax rates through Community 
instruments  would  address  the  issue  of  unfair  competition  in  an  efficient  way  and  would 
reduce distortions of competition. It would moreover contribute to reduce detours which are 
detrimental to the environment. This proposal, by increasing the minimum levels of taxation 
rate,  will  address  these  problems.  Assuming  Member  States  do  not  change  their  fiscal 
strategy15,  all  but  two  countries  would  have  excise  duties  for  gas  oil  ranging  from  € 380  to 
€ 420/1000 l by 2014, whereas all countries respecting the minimum level but Germany and 
the United Kingdom currently range from € 302 to 420.  

By its nature, such action can only be conducted by the Union. As past and present oil shocks 
have  shown,  when  erratic  fluctuations  in  prices  for  crude  oil  take  place,  the  differences 
between  the  taxes  levied  on  gas  oil  fuel  in  different  Member  States  become  an  even  more 
sensitive  issue.  Unilateral  measures  by  Member  States  risk  causing  a  race  to  the  minimum 
level  in  the  fiscal  area,  which  only  serves  to  create  even  more  difficulties  in  all  Member 
States.  The  Commission  and  the  Council  of  Ministers  have  repeatedly  made  clear  that  only 
common approaches would avoid fiscal disorder and distortions of competition. 

Besides, a Community act is also needed in order to make the provisions of the Energy Tax 
Directive more flexible to allow decoupling to narrow rates differences, by amending Article 
7(4)  and  thus  opening  the  flexibility  of  compensation  between  tax  and  road  charges  to  all 
Member States. 

•  Proportionality principle 

The proposal complies with the proportionality principle. 

Amending  the  Energy  Tax  Directive  is  best  achieved  by  a  new  proposal  for  a  Directive.  A 
Directive  gives  the  needed  flexibility  to  the  Member  States  in  order  to  accommodate  their 
needs and the needs of their economic operators. 

Experience in several Member States indicates that managing the application of a specific tax 
rate for commercial gas oil is simple for both operators and public authorities when using a 
refunding mechanism. The latter is included in the proposal. 

•  Choice of instruments 

Proposed instrument: Directive. 

Other means would not be adequate because this area is already covered by a Directive. It is 
clear that co-regulation or self-regulation would not be efficient to tackle the problem. In this 
particular  case,  a  Directive  presents  an  appropriate  implementation  mechanism  for  the 
interested parties. 

•  Budgetary implication 

The proposal has no implication for the Community budget. 

15 

Only Member States having to increase their rates because of the new minimum will do so and remain 
close to the minimum. 

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2007/0023 (CNS) 

Proposal for a 

COUNCIL DIRECTIVE 

amending Directive 2003/96/EC as regards the adjustment of special tax arrangements 
for gas oil used as motor fuel for commercial purposes and the coordination of taxation 
of unleaded petrol and gas oil used as motor fuel 

(Text with EEA relevance) 

THE COUNCIL OF THE EUROPEAN UNION, 

Having regard to the Treaty establishing the European Community, and in particular Article 
93 thereof, 

Having regard to the proposal from the Commission16, 

Having regard to the opinion of the European Parliament17, 

Having regard to the opinion of the European Economic and Social Committee18, 

Whereas: 

(1) 

(2) 

The White Paper of the Commission of 12 September 2001, European transport policy 
for 2010: time to decide19, states that harmonization of national tax rates applied to gas 
oil used for commercial purposes would improve the sustainability of road transport. 

In  the  Communication  from  the  Commission  to  the  Council  and  the  European 
Parliament - Keep Europe moving - Sustainable mobility for our continent - Mid-term 
review of the European Commission’s 2001 Transport White Paper20, the Commission 
states  that  transport  policy  pursues  the  objective  of  lowering  CO2  emissions  and 
underlines  that  international  environmental  commitments,  including  those  under  the 
Kyoto Protocol, must be integrated into transport policy. Similar considerations apply 
to transport related tax policy. 

(3) 

Council  Directive  2003/96/EC  of  27  October  2003  restructuring  the  Community 
framework  for  the  taxation  of  energy  products  and  electricity21  lays  down  the  tax 
framework  for  fuels  used  as  a  propellant.  It  permits  the  decoupling  of  tax 

16 
17 
18 
19 
20 
21 

OJ C […], […], p. […]. 
OJ C , , p. . 
OJ C , , p. . 
COM(2001) 370. 
COM(2006) 314. 
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). 

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arrangements  for  fuels  used  for  commercial  purposes  and  for  other  purposes  under 
certain conditions.  

(4)  While  fuel  represents  a  large  proportion  of  the  running  costs  of  a  road  haulage 
business, wide divergences in the level of taxation applied to gas oil by the Member 
States  can  be  observed.  These  divergences  lead  to  fuel  tourism  and  distortions  of 
competition.  Enhanced  approximation  at  Community  level  of  the  level  of  taxation 
applicable to commercial gas oil would address the issue of unfair competition in an 
efficient  manner  and  would  eventually  result  in  better  functioning  of  the  internal 
market and a reduction of damage to the environment.  

(5) 

(6) 

(7) 

(8) 

(9) 

The  impact  assessment  carried  out  by  the  Commission  showed  that  the  best  way  to 
implement  enhanced  approximation  of  the  levels  of  taxation  of  commercial  gas  oil 
consists  in  an  increase  of  the  minimum  level  for  commercial  gas  oil,  given  that  it 
combines the reduction of distortions of competition and resulting fuel tourism as well 
as  of  overall  consumption.  It  is  therefore  appropriate  to  provide  that  from  2012  the 
minimum  level  of  taxation  for  gas  oil  should  equal  the  minimum  level  of  taxation 
applicable to unleaded petrol, which reflects the fact that these two fuels are similarly 
detrimental to the environment. From 2014 the minimum level of taxation should be 
€ 380 per 1000 l, in order to contribute to maintain the minimum level constant in real 
terms and to reduce further distortions of competition and environmental damage. 

From an  environmental point of  view,  it appears appropriate, at this stage, to set the 
same  minimum  levels  of  taxation  for  unleaded  petrol  and  for  gas  oil.  There  are  no 
valid  reasons  to  fix  national  levels  of  taxation  for  non-commercial  gas  oil  and 
unleaded petrol below the national level applicable to commercial gas oil. For Member 
States  which  differentiate  between  commercial  and  non-commercial  use  of  gas  oil 
used as propellant, it should therefore be clarified that the national level of taxation for 
non-commercial  gas  oil  used  as  propellant  shall  not  be  less  than  the  national  level 
applied by that Member State to commercial gas oil. The same should apply between 
unleaded petrol and commercial gas oil used as propellant. 

Certain  Member  States  have  been  granted  transitional  periods  in  order  to  smoothly 
adapt to the levels of taxation set out in Directive 2003/96/CE. For the same reasons, 
these transitional periods should be supplemented with regard to this Directive.  

To the extent this Directive affects the levels of taxation in Member States and, as a 
result, existing State aid measures, this Directive does not release the Member States 
from  the  necessity,  where  applicable,  to  adjust  their  national  measures  and  to  notify 
the change to the Commission in accordance with the State aid rules. 

Differentiation between gas oil tax rates for commercial and non-commercial gas oil 
should  be  implemented  through  a  refund  mechanism  which  should  be  non-
discriminatory.  A  set  of  common  rules  applicable  in  the  matter  should  be  fixed  at 
Community level, in particular concerning cross-border refunding procedures.  

(10)  The  possibility  for  Member  States  to  fix  a  reduced  rate  on  gas  oil  for  commercial 
purposes  below  the  national  level  in  force  on  1  January  2003,  when  introducing  or 
applying a system of road user charges which results in a broadly equivalent overall 
tax  burden,  should  be  extended.  To  this  end  and  in  the  light  of  experience,  it  is 
appropriate  to  no  longer  maintain  the  requirement  whereby  the  national  level  of 

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taxation in force on 1 January 2003 for gas oil used as propellant must be at least twice 
as high as the minimum level of taxation applicable on 1 January 2004.  

(11)  Since  the  objectives  of  the  proposed  action,  namely  to  enhance  approximation  of 
taxation applicable to commercial gas oil in order to reduce the serious distortions of 
competition  which  affect  haulage  markets  so  as  to  achieve  better  the  common 
transport policy objectives and to ensure a better protection of the environment, cannot 
be  sufficiently  achieved  by  the  Member  States  and  can  therefore,  by  reason  of  their 
European  dimension,  be  better  achieved  at  Community  level,  the  Community  may 
adopt measures, in accordance with the principle of subsidiarity as set out in Article 5 
of  the  Treaty.  In  accordance  with  the  principle  of  proportionality,  as  set  out  in  that 
Article,  this  Directive  does  not  go  beyond  what  is  necessary  to  achieve  those 
objectives. 

(12)  Directive 2003/96/EC should therefore be amended accordingly, 

HAS ADOPTED THIS DIRECTIVE: 

Article 1 

Directive 2003/96/EC is amended as follows: 

(1) 

 Article 7 is amended as follows: 

(a) 

paragraphs 1 and 2 are replaced by the following: 

“1.  As from 1 January 2004, 1 January 2010, 1 January 2012 and 1 January 2014 
the minimum levels of taxation applicable to motor fuels shall be fixed as set out in 
Annex I Table A.  

2.  Member States may differentiate between commercial and non-commercial use 
of  gas  oil  used  as  propellant,  provided  that  the  Community  minimum  levels  are 
observed, and the rate for commercial gas oil used as propellant does not fall below 
the national level of taxation in force on 1 January 2003. 

The national levels of taxation applicable in a Member State for non-commercial gas 
oil  and  unleaded  petrol  used  as  propellant  shall  not  be  less  than  the  national  level 
applied by that Member State for commercial gas oil.”  

(b)  Paragraph 4 is replaced by the following: 

“4  Member  States  which  apply  or  introduce  a  system  of  road  user  charges  to 
motor  vehicles  using  commercial  gas  oil  as  defined  in  paragraph  3,  may  apply  a 
reduced rate to such gas oil that goes below the national level of taxation in force on 
1  January  2003,  as  long  as  the  overall  tax  burden  remains  broadly  equivalent,  and 
provided that the Community minimum level applicable to gas oil is observed.” 

(c)  The following paragraph 5 is added: 

“5.  Member  States  shall  ensure  that  the  differentiated  levels  of  taxation  of 
commercial  and  non-commercial  gas  oil  are  implemented  by  means  of  a  non-

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discriminatory refund mechanism. This mechanism shall ensure that operators of all 
Member  States  have  access  to  refunding  under  conditions  which  are  equal, 
transparent and simple from an administrative point of view. 

The  Commission  shall  establish  common  rules  as  to  the  mechanisms  referred  to  in 
the first subparagraph, in accordance with the procedure referred to in Article 27(2).” 

(2) 

Article 18 is amended as follows: 

(a) 

In paragraph 3, the first sentence is replaced by the following: 

“The  Kingdom  of  Spain  may  apply  a  transitional  period  until  1  January  2007  to 
adjust its national level of taxation on gas oil used as propellant to the new minimum 
level of EUR 302, until 1 January 2012 to reach EUR 330, until 1 January 2014 to 
reach EUR 359 and until 1 January 2016 to reach EUR 380.” 

(b) 

In paragraph 4, the first sentence is replaced by the following: 

“The  Republic  of  Austria  may  apply  a  transitional  period  until  1  January  2007  to 
adjust its national level of taxation on gas oil used as propellant to the new minimum 
level of EUR 302, until 1 January 2012 to reach EUR 330, until 1 January 2014 to 
reach EUR 359 and until 1 January 2016 to reach EUR 380.” 

(c) 

In paragraph 5, the first sentence is replaced by the following: 

“The  Kingdom  of  Belgium  may apply a transitional period until 1 January 2007 to 
adjust its national level of taxation on gas oil used as propellant to the new minimum 
level of EUR 302, until 1 January 2012 to reach EUR 330, until 1 January 2014 to 
reach EUR 359 and until 1 January 2016 to reach EUR 380.” 

(d) 

In paragraph 6, the first sentence is replaced by the following: 

“The  Grand  Duchy  of  Luxembourg  may  apply  a transitional period  until 1 January 
2009 to adjust its national level of taxation on gas oil used as propellant to the new 
minimum level of EUR 302, until 1 January 2012 to reach EUR 330, until 1 January 
2014 to reach EUR 359 and until 1 January 2016 to reach EUR 380.” 

In paragraph 7, in the second sub-paragraph, the first sentence is replaced by 

(e) 
the following: 

“The  Portuguese  Republic  may  apply  a  transitional  period  until  1  January  2009  to 
adjust its national level of taxation on gas oil used as propellant to the new minimum 
level of EUR 302, until 1 January 2012 to reach EUR 330, until 1 January 2014 to 
reach EUR 359 and until 1 January 2016 to reach EUR 380.” 

In paragraph 8, in the third sub-paragraph, the first sentence is replaced by the 

(f) 
following: 

“The  Hellenic  Republic  may  apply  a  transitional  period  until  1  January  2010  to 
adjust its national level of taxation on gas oil used as propellant to the new minimum 
level of EUR 302, until 1 January 2012 to reach EUR 330, until 1 January 2014 to 
reach EUR 359 and until 1 January 2016 to reach EUR 380.” 

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(3) 

Article 18a is amended as follows: 

(a) 

In paragraph 5, the first sentence is replaced by the following: 

“The  Republic  of  Latvia  may  apply  a  transitional  period  until  1  January  2011  to 
adjust its national level of taxation on gas oil and kerosene used as propellant to the 
new minimum level of EUR 302 per 1000 l, until 1 January 2013 to reach EUR 330 
and, for gas oil used as propellant, until 1 January 2015 to reach EUR 359 and until 1 
January 2017 to reach EUR 380.” 

(b) 

In paragraph 6, the first sentence is replaced by the following: 

“The Republic of Lithuania may apply a transitional period until 1 January 2011 to 
adjust its national level of taxation on gas oil and kerosene used as propellant to the 
new minimum level of EUR 302 per 1000 l, until 1 January 2013 to reach EUR 330 
and, for gas oil used as propellant, until 1 January 2015 to reach EUR 359 and until 1 
January 2017 to reach EUR 380.” 

In paragraph 9, in the second sub-paragraph, the first sentence is replaced by 

(c) 
the following: 

“The  Republic  of  Poland  may  apply  a  transitional  period  until  1  January  2010  to 
adjust its national level of taxation on gas oil used as propellant to the new minimum 
level of EUR 302 per 1000 l, until 1 January 2012 to reach EUR 330, until 1 January 
2014 to reach EUR 359 and until 1 January 2016 to reach EUR 380.” 

(4) 

The following Article 18c is added: 

“Article 18c 

Without  prejudice  to  the  derogations  from  Article  7  laid  down  in  the  Treaty 
concerning the accession of the Republic of Bulgaria and Romania to the European 
Union.Those Member States may apply a further transitional period for gas oil used 
as  propellant  until  1  January  2015  to  reach  EUR  359  and  until  1  January  2017  to 
reach EUR 380.” 

(5) 

In Annex I, table A, the rows relating to unleaded petrol and gas oil are replaced by the 
following: 

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1 January 2004 

1 January 2010 

1 January 2012 

1 January 2014 

359 

359 

359 

380 

302 

330 

359 

380 

Unleaded petrol 
(in euros 
per  
1 000 l) 

CN Codes 2710 11 
31, 2710 11 41, 
2710 11 45 and 
2710 11 49 

Gas oil 
(in euros 
per  
1 000 l) 

CN  codes  2710  19 
41 to 2710 19 49 

Article 2 

1. 

Member  States  shall  bring  into  force  the  laws,  regulations  and  administrative 
provisions  necessary  to  comply  with  this  Directive  by  31  December  2007  at  the 
latest.  They  shall  forthwith  communicate  to  the  Commission  the  text  of  those 
provisions and a correlation table between those provisions and this Directive. 

When  Member  States  adopt  these  provisions,  they  shall  contain  a  reference  to  this 
Directive or shall be accompanied by such reference on the occasion of their official 
publication. Member States shall determine how such reference is to be made.  

2. 

Member States shall communicate to the Commission the text of the main provisions 
of national law which they adopt in the field covered by this Directive. 

This Directive shall enter into force on the twentieth day following that of its publication in 
the Official Journal of the European Union. 

Article 3 

Article 4 

This Directive is addressed to the Member States. 

Done at Brussels,  

For the Council 
The President 

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