Proposal for a COUNCIL DECISION authorising France to apply a reduced rate of taxation to unleaded petrol used as motor fuel and consumed in Corsican departments in accordance with Article 19 of Directive 2003/96/EC
Date: 2013-01-17
Institutions: European Commission
Subjects: Corsica, France, derogation from EU law, fuel tax, lead-free petrol

EUROPEAN 
COMMISSION 

Brussels, 17.1.2013  
COM(2013) 8 final 

2013/0006 (NLE) 

Proposal for a 

COUNCIL DECISION 

authorising France to apply a reduced rate of taxation to unleaded petrol used as motor 
fuel and consumed in Corsican departments in accordance with Article 19 of Directive 
2003/96/EC 

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EXPLANATORY MEMORANDUM 

1. 

CONTEXT OF THE PROPOSAL 

The  taxation  of  energy  products  and  electricity  in  the  EU  is  governed  by  Council  Directive 
2003/96/EC (hereafter 'the Directive'). The Directive specifies which products are taxable, the 
uses that make them taxable and the minimum rates at which they must be taxed depending 
on whether they are used as motor fuel, for certain industrial or commercial purposes or for 
heating. 

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

The objective of this proposal is to permit France to continue to apply a reduction in the rate 
of taxation on unleaded petrol used as motor fuel and consumed in the Corsican departments 
with  a  view  to  partially  offsetting  the  additional  costs  induced  by  geographical  remoteness 
and difficulties of supply. 

The request and its general context 

Council  Decision  2007/880/EC  of  20  December  2007  authorised  France  to  apply  a  reduced 
rate  of  excise  duty  to  unleaded  petrol  used  as  motor  fuel  and  consumed  in  the  Corsican 
departments  on  the  condition  that  the  reduction  does  not  go  beyond  the  additional  cost  of 
transport,  storage  and  distribution  compared  with  mainland  France.  The  objective  of  this 
Decision is to permit France to partially offset the additional costs induced  by geographical 
remoteness  and  difficulties  of  supply.  In  application  of  this  Decision,  France  applied  a 
reduction of EUR 1 per hectolitre of unleaded petrol. 

By letter dated 12 March 2012, the French authorities requested an authorisation to continue 
to apply a reduction of EUR 1 per hectolitre for a period of six years, from 1 January 2013 to 
31 December 2018. By letters dated 25 June 2012 and 5 October 2012 France has submitted 
additional information concerning the justification of the request for derogation.  

As  in  the  previous  requests,  the  French  authorities  argued  that  the  reduction  in  the  rate  of 
excise duty is required to offset part of the higher price of unleaded petrol (1) resulting from 
the insular nature of Corsica. The higher price is caused by the additional costs of selling fuel 
in this region, which is estimated at 7 eurocent per litre. According to the French authorities, 
several reasons explain this additional cost: 

(1) 

Given that there is no refinery in Corsica, transport and distribution costs are higher 
for delivery of fuel there because of the additional costs associated with maritime and 
road  freight  (longer  distance  and  journey  time).  The  distance  from  the  nearest 
refinery  in  Fos-sur-Mer  to  the  two  storage  warehouses  on  Corsica  in  Luciano  and 
Ajaccio  is  respectively  358 km  (of  which  182 km  by  sea)  and  315 km  (of  which 
170 km  by  sea).  Transport  to  these  warehouses  exclusively  takes  place  by  boat, 
whereas  all  warehouses  situated  on  mainland  France  are  all  directly  linked  to  a 
refinery through a network of pipelines, which considerably reduces transport costs. 

(1) 

The  pump  price  of  unleaded  petrol  (SSP  95)  in  Corsica  on  22  May  2012  was  EUR  1.66  per  litre 
compared to an average price of EUR 1.56 per litre on the French territory. 

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(2) 

(3) 

As an example, costs of transport to Corsica are four to five times higher than costs 
for a transport by pipeline between Le Havre and the region of Paris. 

The much smaller capacity of the two warehouses in Corsica (respectively 16 000 m3 
and  19 000 m3)  requires  more  frequent  supplies  to  them.  Investment  in  the 
maintenance,  compliance  of  facilities  and  staff  costs  are  not  related  to  business 
volume  of  the  depots.  The  total  volume  of  fuel  entered  in  these  depots  is  less  than 
400 000 m3  per  year,  which  is  half  of  the  average  volume  for  a  depot  on  the 
mainland. Hence, the storage cost per m3 is higher in Corsica. 

The  fixed  costs  borne  by  distributors  must  be  absorbed  by  a  lower  sales  volume 
because  of  the  low  population (2),  the  very  mountainous  terrain  (90 %  mountains) 
and the small volumes of fuel sold by each service station. The areas of distribution 
are  therefore  isolated  and  far  apart  from each  other.  The  number  of  inhabitants  per 
service station is 2 485 compared to an average of 5 768 on the French territory and 
the sales volume per service station amounts to 2 278 m3 for Corsica as compared to 
4 149 m3 in mainland France. 

As illustrated in the table below, the international petrol price quotations for Corsica and for 
mainland France are the same amounting to EUR 64.82 per 100 litres. The difference in the 
gross  transport  costs  is  very  high  between  mainland  France  and  Corsica,  respectively  EUR 
7.77 per 100 litres and EUR 23.28 per 100 litres. In spite of the lower tax rates (both energy 
tax and VAT) the final price for unleaded petrol is higher in Corsica than in mainland France. 
 The table below shows the price structure of petrol and diesel on 10 August 2012 

Average  price  of  a  fuel  in  EUR 
per 100 litres  

Mainland 
France 

petrol 

Corsica 

petrol 

South 
Corsica 

petrol 

Price including taxes 

160.07 

165.00 

163.51 

VAT 

Energy tax  

Gross  transport  and  distribution 
margin 

26.23 

61.25 

7.77 

18.98 

57.92 

23.28 

18.81 

57.92 

21.96 

International quotations 

64.82 

64.82 

64.82 

(Hypothese Corse) 

Source: www.prix- carburants.gouv.fr 

France  also  pointed  out  that  the  measure  comes  under  the  specific  government  policy  in 
favour  of  development  in  Corsica,  justified  by  the  handicap  of  insularity.  According  to 
available statistics, Corsica as a whole has a gross domestic product per capita of EUR 23 800 
in 2009, which is considerably lower than the national average of EUR 29 574 in that year. 

(2) 

The number of inhabitants is 35/km2 in Corsica compared to 94/km2 in mainland France. 

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Provisions in the field covered by 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 2011/38/EU of 18 January 2011 authorising France to apply differentiated 
levels of taxation to motor fuels in accordance with Article 19 of Directive 2003/96/EC. The 
regionalisation  of  the  rates  of  domestic  consumption  tax  on  petroleum  products  (TIPP) 
concerns  both  diesel  and  unleaded  petrol  used  as  motor  fuel.  It  forms  part  of  the  policy  of 
decentralisation planned by the French authorities inasmuch as it allows the French regions, 
including  Corsica,  to  adjust  the  rates  of  excise  duty  applicable  to  motor  fuels.  This 
decentralisation  is  part  of  an  approach  designed  to  increase  administrative  effectiveness  by 
improving  the  quality  and  reducing  the  cost  of  public  services.  It is  also  part  of  a  policy  of 
subsidiarity, allowing for decisions to be adopted in many areas at the appropriate level (see 
the second recital to Decision 2011/38/EU) and therefore pursues objectives other than those 
sought  by  the  tax  reduction  requested.  The  authorisation  expires  at  the  end  of  2012,  but 
France has requested its extension. 

Assessment of the measure under Article 19 of Directive 2003/96/EC 

Specific policy considerations 

Article 19(1), first subparagraph, of the Directive reads as follows:  

'In addition to the provisions set out in the previous Articles, in particular in Articles 5, 15 and 
17, the Council, acting unanimously on a proposal from the Commission, may authorise any 
Member  State 
introduce  further  exemptions  or  reductions  for  specific  policy 
considerations.' 

to 

The tax differentiation places unleaded petrol consumers in Corsica on a more equal footing 
with  similar  consumers  on  the  mainland  by  partially  offsetting  the  additional  cost  borne  by 
consumers  in  Corsica.  The  proposed  measure  therefore  meets  certain  regional  and  cohesion 
policy objectives.  

The tax reduction does not go beyond the additional costs of transport and distribution borne 
by consumers in Corsica. The EUR 10/1 000 l reduction in the cost of unleaded petrol is much 
smaller than the difference between the respective final prices.  

The  reduced  rate  of  taxation  on  the  consumption  of  unleaded  petrol  currently  applied  in 
Corsica (EUR 579.2/1 000 l) (3) is still appreciably higher than the minimum EU level set by 
Directive 2003/96/EC (EUR 359/1 000 l).  

Consistency with the other policies and objectives of the Union 

When the Commission examines a request, it takes into account the proper functioning of the 
internal  market,  the  need  to  ensure  fair  competition  and  the  implementation  of  the  EU’s 
health, environment, energy and transport policies.  

(3) 

This  rate  takes  into  account  the  reduction  applied  by  Corsica  in  application  of  Council  Decision 
2011/38/EU of 17 January 2011. 

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The  measure  is  acceptable  from  the  point  of  view  of  the  proper  functioning  of  the  internal 
market  and  of  the  need  to  ensure  fair  competition.  It  merely  seeks  to  partially  offset  the 
additional  costs  associated  with  Corsica’s  island  status.  In  view  of  the  remote  and  insular 
nature of the departments to which it applies and the moderateness of the reduction in the rate 
-  which  is,  moreover,  very  high  compared  with  the  EU  minimum  -  the  measure  is  not 
expected  to  lead  to  changes  in  fuel  consumption,  through  the  attraction  of  consumers  from 
outside these areas. 

As the effect of the tax relief on transport is expected to be insignificant, and compensatory 
policies  could  be  found  for  any  marginal  effects  which  might  occur,  the  measure  is  not 
incompatible with the health, environment, energy and transport policies of the union. 

Period  of  application  of  the  measure  and  development  of  the  EU  framework  on  Energy 
Taxation 

Article 19(2) of Directive 2003/96/EC lays down, for this type of measure, a maximum period 
of  six  years,  with  the  possibility  of  renewal.  The  Commission  suggests  that  the  period  of 
application is set to the maximum allowed by Directive 2003/96/EC, i.e. six years, taking into 
account the absence of any negative impact of the current arrangement on intra-EU trade and 
on  the  general  level  of  taxation  of  fuels  in  France,  in  order  to  ensure  legal  certainty  for  the 
region, the Commission suggests at this stage to grant the authorisation for six years, i.e. from 
1 January 2013 until 31 December 2018. 

However,  in  order  not  to  undermine  future  general  developments  of  the  existing  legal 
framework, it is appropriate to provide that, should the Council, acting on the basis of Article 
113 of the Treaty, introduce a modified general system for the taxation of energy products to 
which the present authorisation would not be adapted, this Decision shall expire on the day on 
which those modified rules become applicable. 

Should  the  Council  adopt  such  a  new  system  and  should  the  Commission  consider  that  the 
authorisation  proposed  herewith  is  still  warranted,  it  would  examine,  positively  and  in  a 
timely  manner,  any  request  from  France  for  a  similar  authorisation  adapted  to  that  new 
system, so as to provide for the continuity of the present proposal. 

State aid rules 

The measure may constitute State aid in accordance with Article 107(1) of the TFEU. Since 
the reduced rates are above the EU minima, the measure would be covered by Article 25 of 
Regulation  800/2008/EC (4)  (the  General  Block  Exemption  Regulation)  and  would  thus  be 
considered  compatible  with  the  internal  market.  However,  as  the  period  of  validity  of  the 
General  Block  Exemption  Regulation  ends  on  31  December  2013  any  aid  inherent  in  the 
measure  would  need  to  be  notified  to  the  Commission  under  State  aid  rules,  in  case  the 
Commission  would  not  have  adopted  a  new  Regulation  comparable  to  the  General  Block 
Exemption Regulation or in case such new Regulation would not contain a rule equivalent to 
the one present in Article 25.  

The decision is without prejudice to the applicable State aid rules during the period covered 
by the derogation. 

(4) 

Commission  Regulation  (EC)  No  800/2008/EC  of  6  August  2008  declaring  certain  categories  of  aid 
compatible  with  the  common  market  in  application  of  Articles  87  and  88  of  the  Treaty,  OJ  L  214, 
9.8.2008, p. 3. 

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2. 

RESULTS OF CONSULTATIONS WITH THE INTERESTED PARTIES AND 
IMPACT ASSESSMENTS 

Consultation of interested parties 

The proposal consists of a tax reduction which concerns only France. 

Obtaining and using expertise 

No external expertise has been used. 

Impact assessment 

No impact assessment has been carried. 

Summary of the measure proposed 

The  Commission  proposes  to  authorise  the  tax  reduction  of  EUR  10  per  1 000 l  until  31 
December  2018,  thereby  permitting  France  to  apply  a  reduced  rate  of  taxation  to  unleaded 
petrol used as motor fuel and consumed in the Corsican departments. 

Legal basis  

Article 19 of Council Directive 2003/96/EC. 

Principle of subsidiarity  

The field of indirect taxation covered by Article 113 of the TFEU is not in itself within the 
exclusive competence of the EU within the meaning of Article 3 of the Treaty. 

However,  the  exercise  by  Member  States  of  their  concurrent  competences  in  this  field  is 
strictly circumscribed and limited by the measures harmonising national laws already adopted 
by the Council. 

As  it  happens,  pursuant  to  Article  19  of  Directive  2003/96/EC,  only  the  Council  is 
empowered to authorise a Member State to introduce further exemptions or reductions within 
the meaning of that provision. Member States cannot substitute themselves for the Council. 

The proposal therefore respects the principle of subsidiarity. 

Principle of proportionality 

The proposal respects the principle of proportionality. The EUR 0.01/l reduction in the cost of 
unleaded petrol is well below the additional cost borne (EUR 0.10 per litre). 

Choice of instruments 

Instrument proposed: Council decision. 

Article 19 of Directive 2003/96 makes provision for this type of measure only. 

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3. 

BUDGETARY IMPLICATION  

The  measure  does  not  impose  any  financial  and  administrative  burden  on  the  Union,  The 
proposal therefore has no impact on the Union budget. 

4. 

OPTIONAL ELEMENTS  

None. 

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2013/0006 (NLE) 

Proposal for a 

COUNCIL DECISION 

authorising France to apply a reduced rate of taxation to unleaded petrol used as motor 
fuel and consumed in Corsican departments in accordance with Article 19 of Directive 
2003/96/EC 

THE COUNCIL OF THE EUROPEAN UNION, 

Having regard to the Treaty on the Functioning of the European Union, 

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

Having regard to the proposal from the European Commission, 

Whereas: 

(1) 

(2) 

(3) 

(4) 

(5) 

By Council Decision 2007/880/EC (2) France was authorised to apply a reduced rate 
of  taxation  to  unleaded  petrol  used  as  motor  fuel  and  consumed  in  Corsican 
departments in accordance with Article 19 of Directive 2003/96/EC. 

By letter dated 12 March 2012, France requested authorisation to apply a reduced rate 
of energy tax to unleaded petrol used as motor fuel by way of extension of a practice 
followed  under  Decision  2007/880/EC.  The  reduction  amounts  to  1  EUR  per 
hectolitre. The authorisation is being requested for the period from 1 January 2013 to 
31 December 2018. In Corsica the cost of supplying unleaded petrol to the forecourt is 
appreciably  higher  than  in  mainland  France,  final  prices  being  0,10  EUR  per  litre 
higher than on the mainland. 

By reducing the tax on unleaded petrol borne by consumers in Corsica, the consumers 
concerned  will  be  placed  on  a  more  equal  footing  with  those  on  the  mainland.  The 
measure therefore meets regional and cohesion policy objectives. 

The  tax  reduction  is  no  larger  than  what  is  necessary  to  allow  for  the  additional 
transport and distribution costs borne by consumers in Corsica. 

The  final  level  of  taxation  complies  with  the  minimum  rates  laid  down  in  Directive 
2003/96/EC  -  currently  359  EUR  /1 000 l  (or  35,90  EUR  /hl).  This  holds  true  even 
allowing for an authorisation analogous to the one granted by Council Implementing 
Decision  2011/38/EU  of  18  January  2011  authorising  France  to  apply  differentiated 
levels  of  taxation  to  motor  fuels  in  accordance  with  Article  19  of  Directive 

(1) 
(2) 

OJ L 283, 31.10.2003, p. 51. 
OJ L 346, 29.12.2007, p. 15. 

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(6) 

(7) 

(8) 

(9) 

(10) 

2003/96/EC (3),  for  the  period  as  from  1  January  2013,  in  case  the  effects  of  such 
decision are combined with those of this Decision. 

In view of the remote and insular nature of the departments to which it applies and the 
moderateness  of  the  reduction  in  the  rate  -  which  is,  moreover,  very  high  compared 
with the minimum level prescribed by Directive 2003/96/EC - the measure requested 
will not give rise to any movement specifically linked to the supplying of fuel. 

Consequently,  the  measure  is  acceptable  from  the  point  of  view  of  the  proper 
functioning of the internal market and of the need to ensure fair competition and it is 
not  incompatible  with  the  health,  environment,  energy  and  transport  policies  of  the 
Union. 

France  should  therefore  be  authorised,  pursuant  to  Article  19(2)  of  Directive 
2003/96/EC, to apply a reduced rate of taxation to unleaded petrol used as motor fuel 
and consumed in Corsica, and this until 31 December 2018. 

It follows from Article 19(2) of Directive 2003/96/EC that each authorisation granted 
under that Article must be strictly limited in time. 

In  order  to  provide  the  regions  concerned  with  a  sufficient  degree  of  certainty,  the 
authorisation  should  be  granted  for  a  period  of  six  years.  However,  in  order  not  to 
undermine  future  general  developments  of  the  existing  legal  framework,  it  is 
appropriate to provide that, should the Council, acting on the basis of Article 113 of 
the Treaty, introduce a modified general system for the taxation of energy products to 
which  this  authorisation  would  not  be  adapted,  this  Decision  expires  on  the  day  on 
which the rules on that modified system become applicable. 

(11) 

It  should  be  ensured  that  France  can  apply  the  specific  reduction  to  which  this 
Decision relates seamlessly following on from the situation existing before 1 January 
2013,  under  Decision  2007/880/EC.  The  authorisation  requested  should  therefore  be 
granted with effect from 1 January 2013. 

(12)  This Decision is without prejudice to the application of the Union rules regarding State 

aid, 

HAS ADOPTED THIS DECISION:  

Article 1 

France  is  authorised  to  apply  a  reduction  in  the  rate  of  taxation  not  exceeding  1  EUR  per 
hectolitre to unleaded petrol used as motor fuel and consumed in the Corsican departments 

In  order  to  avoid  any  over-compensation,  the  reduction  shall  not  go  beyond  the  additional 
costs of transport, storage and distribution compared with mainland France. 

The reduced rate shall comply with the obligations in Directive 2003/96/EC, in particular the 
minimum rates referred to in Article 7 thereof. 

(3) 

OJ L 19, 22.1.2011, p. 13. 

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Article 2 

This Decision shall apply from 1 January 2013 and shall expire on 31 December 2018. 

However,  should  the  Council,  acting  on  the  basis  of  Article  113  of  the  Treaty,  introduce  a 
modified  general  system  for  the  taxation  of  energy  products  to  which  the  authorisation 
granted in Article 1 of this Decision would not be adapted, this Decision shall expire on the 
day on which the rules on that modified system become applicable.  

Article 3 

This Decision is addressed to the French Republic. 

Done at Brussels,  

For the Council 
The President 

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