Proposal for a COUNCIL DECISION authorising France to apply reduced levels of taxation to petrol and gas oil used as motor fuels in accordance with Article 19 of Directive 2003/96/EC
Date: 2013-01-30
Institutions: European Commission
Subjects: France, derogation from EU law, diesel fuel, fuel tax, petrol

EUROPEAN 
COMMISSION 

Brussels, 30.1.2013  
COM(2013) 22 final 

2013/0018 (NLE) 

Proposal for a 

COUNCIL DECISION 

authorising France to apply reduced levels of taxation to petrol and gas oil used as 
motor fuels in accordance with Article 19 of Directive 2003/96/EC 

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EXPLANATORY MEMORANDUM 

1. 

CONTEXT OF THE PROPOSAL 

Taxation  of  energy  products  and  electricity  in  the  EU  is  governed  by  Council  Directive 
2003/96/EC1 (hereafter referred to as the “Energy Taxation Directive” or the “Directive”). 

Pursuant to Article 19(1) of the Directive, in addition to the provisions foreseen in particular 
in  its  Articles  5,  15  and  17,  the  Council,  acting  unanimously  on  a  proposal  from  the 
Commission, may authorise any Member State to introduce further exemptions or reductions 
in the level of taxation for specific policy considerations. 

The objective of this proposal is to allow France to continue to apply, within defined limits, 
differentiated  levels  of  taxation  to  unleaded  petrol  and  gas  oil,  with  the  exclusion  of 
commercially  used  gas  oil.  This  differentiation  is  meant  to  reflect  the  decentralisation  of 
certain specific powers previously exercised by central government. 

The request and its general context 
Council  Implementing  Decision  2011/38/EU2  (hereafter  "Decision  2011/38/EU"),  following 
up on Council Decision 2005/767/EC3 (hereafter "Decision 2005/767/EC"), authorised France 
to apply, until 31 December 2012, reduced levels of taxation to unleaded petrol and gas oil at 
regional  level  for the purposes  of an administrative reform involving  the  decentralisation of 
certain specific powers previously exercised by central government.  

Based  on  that  Decision,  France  is  currently  applying  a  scheme  that  allows  the  French 
administrative regions to apply a reduced level of taxation to unleaded petrol and gas oil with 
the exception of commercially used gas oil. The tax in question is the Taxe Intérieure sur les 
Produits Pétroliers – Domestic Tax on Petroleum Products (TIPP), which is an excise duty. 

By  letter  dated  10  February  2012,  under  Article  19  of  the  Directive,  the  French  authorities 
requested  the  renewal  of  this  scheme  on  identical  terms,  but  for  a  period  of  six  years  from 
1 January 2013  to  31 December  2018.  Additional  information  and  clarifications  were 
provided by the French authorities on 24 May 2012 and 5 October 2012.  

Operation of the measure 

The French Customs Code fixes single maximum tax rates for unleaded petrol and gas oil.  

The regions are allowed to reduce these rates with an amount that, as before, cannot exceed 
EUR 35,4  per  1 000  litres  of  unleaded  petrol,  including  E10  fuel,  and  EUR 23,0  per  1 000 
litres  of  gas  oil  throughout  the  derogation  period.  These  amounts  constitute  the  maximum 
revenue per 1 000 litres that accrues directly to the regions. Every year, the regional Councils 
decide  the  amount  of  the  reduction  by  vote,  proving  the  decision  making  autonomy  of  the 
regions and giving an incentive to improve the quality of their administration which cannot be 
achieved by a transfer from the national budget to the local budgets.  

The level of taxation after reductions can never be lower than the EU minima set in Directive 
2003/96/EC and no reduction would apply to gas oil for commercial use.  

1 

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Council Directive 2003/96/EC of 27 October 2003 restructuring the Community framework for taxation 
of energy products and electricity (OJ L 283 of 31.10.2003 p. 51). 
OJ L 19, 22.1.2011, p. 13. 
OJ L 290, 4.11.2005, p. 25. 

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Control and movement measures for the products concerned 

Central government would retain responsibility for collecting and controlling excise duty on 
gas oil and unleaded petrol, irrespective of the reductions adopted by the regions. 

The  products  would  be  moved  under  duty-paid  arrangements  and  the  fuels  would  be  taxed 
when  released  for  consumption  at  the  rate  of  duty  in  force  in  the  region  to  which  they  are 
supplied. 

To  respond  to  the  specific  fraud  risk  identified  (diversion  of  deliveries  to  benefit  from  tax 
differentials between two regions), the logistical chain would be supervised by means of prior 
identification  of  recipients  by  suppliers  and  notification  of  this  information  to  the  customs 
administration.  The  risk  analysis  indicates  that  recipients  should  be  divided  into  three 
categories:  end  users  with  the  capacity  for  bulk  storage,  service  stations  and  distributors  of 
duty-paid fuel. In the  case  of  a  domestic movement  of fuel duty-paid, customs could verify 
the  origin  of  the  product  and  its  region  of  destination.  In  cases  of  atypical  routes  or 
inexplicably long transport times, customs could investigate whether consignments had been 
diverted from the regional destination initially declared. 

Arguments of France concerning the impact on the internal market and state aid aspects 

The  French  authorities  indicate  that  the  measure  would  not  affect  the  proper  functioning  of 
the  internal  market,  in  particular  since  the  scope  of  the  measure  is  confined  to  fuels  for 
non-commercial  use.  Moreover,  the  variations  between  distribution  networks  in  the  retail 
price of fuel for non-commercial use are greater than the amount of variations that can result 
from the measure. According to the French authorities, no complaints about distortive effects 
of the measure have been received during its application.  

As regards the exclusion from the scope of the measure of gas oil for commercial use, French 
or  EU  road  hauliers  who  meet  the  conditions  for  partial  refund  of  excise  on  gas  oil  for 
commercial use would be subject to the same rate of excise duty, irrespective of the region in 
which  they  bought  the  fuel.  The  planned  arrangements  would  maintain  the  current  refund 
procedure, completely offsetting the effects of the rate reductions decided on by the regions 
through equivalent reductions in the amount of the refund on gas oil for commercial use. The 
arrangements  would  not  therefore  distort  competition  in  the  transport  sector  or  affect  trade 
within the EU. They would not constitute a state aid, the French authorities submit, since road 
haulage companies would be subject to the same rate of excise duty on gas oil for commercial 
use irrespective of the region in which they bought it. 

Arguments of France concerning the period of application of the measure 

With  regard  to  the  duration  of  the  arrangement,  France  stresses  that  to  allow  the  policies 
pursued by the regions to apply for a certain length of time the derogation should be renewed 
for  a  period  of  six  years.  The  three-year  period  set  by  Decision  2011/38/EU  has  proven 
particularly  short  and  was  justified  only  by  the  unusual  nature  of  the  measure  and  the 
concerns  of  Member  States  which  feared  that  it  might  distort  competition.  Initially  the 
measure in question was to accompany the move towards decentralisation in France. In this 
context,  a  period  of  application  of  three  years  is  particularly  short  and  unsuited  to  the 
objective  pursued  since  such  a  timescale  does  not  provide  any  clarity  to  the  regions.  Since 
none  of  the  supposed  difficulties  associated  with  the  measure  has  materialised,  the  French 
authorities  therefore  request  a  period  of  application  of  six  years  for  the  renewal  of  this 
derogation. 

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

Specific policy considerations 

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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  to  introduce  further  exemptions  or  reductions  for 
specific policy considerations. 

According to Decision 2011/38/EU, the national measure in question fulfils this requirement. 
It  follows  from  the  Decision  that  the  regional  differentiation  of  rates,  as  part  of  a  wider 
decentralisation  policy,  aims  at  the  specific  policy  objective  of  increasing  administrative 
effectiveness. It was considered that the possibility of regional differentiation offers regions 
an additional incentive to improve the quality of their administration in a transparent fashion. 
The same decision requires that the reductions be linked to the socio-economic conditions of 
the regions in which they were applied. 

In  this  regard,  the  information  supplied  by  France  confirmed  that  a  link  can  indeed  be 
established  between  application  of  a  regional  rate  below  the  national  rate  and  the  socio-
economic conditions of the regions concerned.  

During the period of application of Decision 2011/38/EU (2010, 2011 and 2012), respectively 
two  (Poitou-Charentes  and  Corse),  five  (Ile-de-France,  Poitou-Charentes,  Rhone-Alps, 
Provence-Alps-Cote d'Azur and Corse) and three regions (Poitou-Charentes, Rhone-Alps and 
Corse) applied a downward tax differentiation. 

Most of the regions which applied the downward adjustment reported GDP per capita below 
the  national  average.  One  of  the  regions  in  addition  reported  a  higher  unemployment  rate 
compared to the average national level of unemployment.  

It  can  therefore  be  concluded  that  the  possibility  to  modulate  the  national  rate  downward 
seems  to  have  offered  the  regional  authorities  the  possibility  to  use  the  tax  in  question  in  a 
way adapted to the socio-economic circumstances prevalent in their territory.  

Consistency with the other policies and objectives of the Union. 

According  to  Article  19(1),  third  subparagraph,  of  the  Directive,  each  request  shall  be 
examined  taking  into  account,  inter  alia,  the  proper  functioning  of  the  internal  market,  the 
need  to  ensure  fair  competition  and  Community  health,  environment,  energy  and  transport 
policies. 

This  examination  has  already  been  conducted  at  the  occasion  of  the  previous  requests  by 
France and which has led to the adoption of Decision 2005/767/EC and Decision 2011/38/EU. 
As stated in these Decisions, the general mechanics of the measure were found not to create 
any obstacles to intra-EU trade; at the same time a number of conditions were fixed in order 
to  ensure  that  the  application  of  the  derogation  would  not  lead  to  any  problem  with  the 
functioning  of  the  internal  market  and  would  not  counteract  the  achievement  of  the  EU's 
policy objectives especially in the fields of energy, climate change and environment.  

For a possible renewal of the scheme as requested by France, the Commission therefore has to 
assess  whether,  in  light  of  the  conditions  laid  down  in  Article  1(2)  and  (3)  of  the  previous 
decision,  compliance  with  the  objectives  and  policies  set  out  in  Article  19(1),  third 
subparagraph, of the Directive, has been achieved during its application, so that the same can 
be predicted, in principle, for the period from 1 January 2013.  

In  this  context,  it  has  also  to  be  verified  whether  the  EU  policy  context  has  undergone  a 
relevant  change  since  the  adoption  of  Decision  2011/38/EU  or  risks  to  undergo  a  future 
change material to the assessment. 

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Internal market and fair competition 

The  risk  of  competitive  distortions  was  considered  low  as  Decision  2005/767/EC  and 
Decision 2011/38/EU set low maximum amounts for the reductions. Hence, the differentiation 
of  duty  rates  between  regions  remains  small  and  might  not  even  exceed  price  differences 
between  distribution  networks.  Moreover,  commercially  used  gas  oil  is  excluded  from  the 
application of the measure. 

As  for  the  levels  of  differentiation,  a  strict  limit  was  set  namely  that  the  reductions  are  no 
greater than €35.4 per 1000 litres of unleaded pe trol or €23.0 per 1000 litres of gas oil. This 
condition has been respected by France.  

The experience gathered with the application of the derogation does not seem to raise doubts 
as  to  the  assessment  reached  in  2005  and  2011.  The  Commission  is  not  aware  of  any 
complaints about distortive effects of the measure on intra-EU trade.  

No  obstacles  to  the  proper  functioning  of  the  internal  market  have  been  reported  either  as 
regards  more  particularly  the  circulation  of  the  products  in  question  in  their  capacity  as 
products subject to excise duty. 

As regards the State aid aspect,  it should first be repeated that commercially used gas oil is 
excluded  from  the  measure.  However,  as  far  as  other  business  users  not  falling  under  the 
definition of Article 7(3) of the Energy Taxation Directive benefiting from the reduced rates 
are  concerned,  or  to  the  extent  that  competition  on  the  level  of  producers  of  oil  products  is 
affected,  the  measure  might  constitute  State  aid  in  accordance  with  Article  107(1)  of  the 
TFEU. Provided that the reduced rates are above the EU minima, to the extent the measure 
would constitute State aid, it would be covered by Article 25 of Regulation 800/2008/EC4 (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 present Article 25. 

Union energy, climate change and environment policies 

Taxes  on  energy  products  have  the  effect  of  lowering  the  demand  for  these  products  and 
therefore also reduce emissions related to their consumption. The Commission therefore has 
to assess whether the reduction of rates applied in certain regions does not lead to an increase 
in  fuel  consumption  (and  thus  related  emissions)  that  would  be  in  contradiction  with  the 
objectives quoted above. 

Decision 2011/38/EC noted that the introduction of the possibility for a downward adjustment 
of  rates  was  accompanied  by  an  increase  in  the  underlying  national  rate  in  France.  It 
concluded that it was unlikely that the overall effect of the new scheme would be a reduced 
incentive for fuel efficiency since the application of the derogation did not allow regions to go 
below  the  rate  in  force  on  national  level  before  the  introduction  of  the  scheme.  Decision 
2011/38/EC also concluded that there was little risk that the regional variations would lead to 
differences in retail prices that would induce traffic detours as the level of differentiation was 
low and these were superseded by differences in retail prices among distribution networks. It 
was therefore expected that the measure would not, in principle, come into contradiction with 
EU energy, climate change and environment policy. 

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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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No new elements regarding these matters have come to the Commission's attention, and the 
assessment referred to remains valid. 

Period of application of the measure and development of the EU framework on Energy 
Taxation 
The Commission proposal of 13 April 2011 for a revision of the Energy Taxation Directive5 
provides for a permanent derogation that would allow France, within certain limits, to apply 
differentiated levels of taxation at the level of the French regions. Hence, the Commission is 
of the view that the period of application of a new Council Decision should be limited to three 
years  and  shall,  in  any  case,  expire  on  the  day  on  which  those  modified  rules  become 
applicable. 

Independently from the above, it should als be recalled that, according to the above mentioned 
proposal energy taxation would be split into two components. This system would be different 
from  the  one  of  Directive  2003/96/EC  as  it  currently  stands  and  on  which  the  present 
authorisation is based. It is important not to undermine such future general developments of 
the existing legal framework. Consequently, it is also 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. 

2. 

RESULTS OF CONSULTATIONS WITH THE INTERESTED PARTIES AND 
IMPACT ASSESSMENTS 

Consultation of interested parties 

This proposal is based on a request made by France and concerns only this Member State. 

Collection and use of expertise 

There was no need for external expertise. 

Impact assessment 

This proposal concerns an authorisation for an individual Member State upon its own request. 

3. 

LEGAL ELEMENTS OF THE PROPOSAL 

The proposal aims at authorising France to derogate from the general provisions of Council 
Directive 2003/96/EC and to apply, within defined limits, differentiated levels of taxation to 
gas oil and unleaded petrol.  

Legal basis 

Article 19 of Council Directive 2003/96/EC. 

Subsidiarity principle 

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

However,  the  exercise  by  Member  States  of  their  concurrent  competences  in  this  field  is 
strictly  circumscribed  and  limited  by  existing  EU  law.  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.  

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COM(2011)169 

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The proposal therefore respects the principle of subsidiarity.  

Proportionality principle 

The proposal respects the principle of proportionality. The tax reduction does not exceed what 
is necessary to attain the objective in question. 

Choice of instruments 

Instrument proposed: Council Decision. 

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

4. 

BUDGETARY IMPLICATION 

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

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2013/0018 (NLE) 

Proposal for a 

COUNCIL DECISION 

authorising France to apply reduced levels of taxation to petrol and gas oil used as 
motor fuels in accordance with Article 19 of Directive 2003/96/EC 

THE COUNCIL 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 electricity6, and in particular 
Article 19(1) thereof, 

Having regard to the proposal from the European Commission, 

Whereas: 

(1) 

(2) 

(3) 

(4) 

Council  Implementing  Decision  2011/38/EU  (hereafter  "Decision  2011/38/EU") 
authorises France to apply, for a period of three years, differentiated levels of taxation 
to gas oil and unleaded petrol for the purposes of an administrative reform involving 
the  decentralisation  of  certain  specific  powers  previously  exercised  by  central 
government. Decision 2011/38/EU expires on 31 December 2012. 

By letter dated 10 February 2012, France requested authorisation to continue to apply 
differentiated rates of taxation under the same conditions for a further six years after 
31 December 2012. 

Decision 2011/38/EC was adopted on the basis that the measure requested by France 
met  the  requirements  set  out  in  Article  19  of  Directive  2003/96/EC,  allowing  tax 
exemption or reduction, but no tax increase, for specific policy reasons. In particular, it 
was  considered  that  the  measure  would  not  hinder  the  proper  functioning  of  the 
internal  market.  It  was  also  considered  that  it  was  in  conformity  with  the  relevant 
Community policies.  

The  national  measure  is  part  of  a  policy  designed  to  increase  administrative 
effectiveness by improving the quality and reducing the cost of public services, as well 
as  a  policy  of  subsidiarity.  It  offers  regions  an  additional  incentive  to  improve  the 
quality  of  their  administration  in  a  transparent  fashion.  In  this  respect,  Decision 
2011/38/EU  requires 
the  socio-economic 
circumstances  of  the  regions  in  which  they  are  applied.  Consequently,  a  number  of 
regions  with  either  lower  than  average  GDP  or  higher  than  average  unemployment 
have  applied  lower  rates.  Overall,  the  national  measure  is  based  on  specific  policy 
considerations.  

the  reductions  be 

linked 

that 

to 

(5) 

The  tight  limits  set  for  the  reduction  of  rates  on  a  regional  basis  as  well  as  the 
exclusion  of  gas  oil  used  for  commercial  purposes  from  the  measure  imply  that  the 
risk  of  competitive  distortions  in  the  internal  market  is  very  low.  Moreover,  the 
application of the measure so far has shown a strong tendency on behalf of regions to 

6 

OJ L 283, 31.10.2003, p. 51. 

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levy  the  maximum  rate  allowable,  which  has  further  decreased  any  potential  for 
competitive distortions. 

(6) 

No  obstacles  to  the  proper  functioning  of  the  internal  market  have  been  reported  as 
regards, more particularly, the circulation of the products in question in their capacity 
as products subject to excise duty. 

(7)  When originally requested, the national measure had been preceded by a tax increase 
equal to the margin for regional reductions. Against this background and in light of the 
conditions  of  the  authorisation  as  well  as  experience  gathered,  the  national  measure 
does  not,  at  this  stage,  appear  to  be  in  conflict  with  EU  energy  and  climate  change 
policies. 

(8) 

It follows from Article 19(2) of Directive 2003/96/EC that each authorisation granted 
under this Article must be strictly limited in time. Moreover, the Commission proposal 
for a Council Directive amending Directive 2003/96/EC restructuring the Community 
framework  for  the  taxation  of  energy  products  and  electricity7  provides  for  a 
permanent rule allowing France, within certain limits, to apply differentiated levels of 
taxation at the level of the French regions. It is therefore appropriate to limit the period 
of  application  of  this  Decision  to  three  years  and  to  stipulate  that,  in  any  event,  this 
Decision expires once the said permanent rule becomes applicable. Moreover, in order 
not  to  undermine  future  general  developments  of  the  existing  legal  framework,  it  is 
also important to provide that, should the Council 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  the  rules  on  this  modified 
system become applicable. 

(9) 

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  2011/38/EU.  The  authorisation  requested  should  therefore  be 
granted with effect from 1 January 2013. 

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

aid, 

HAS ADOPTED THIS DECISION:  

Article 1 

1. 

2. 

(a) 

(b) 

(c) 

France is hereby authorised to apply reduced rates of taxation to unleaded petrol and 
gas oil used as motor fuel. Gas oil for commercial use within the meaning of Article 
7(2) of Directive 2003/96/EC shall not be eligible for any such reductions. 

Administrative regions may be permitted to apply differentiated reductions provided 
the following conditions are fulfilled: 

the  reductions  are  no  greater  than  EUR 35,4  per  1 000  litres  of  unleaded  petrol  or 
EUR 23,0 per 1 000 litres of gas oil; 

the reductions are no greater than the difference between the levels of taxation of gas 
oil for non-commercial use and gas oil for commercial use;  

the reductions are linked to the objective socio-economic conditions of the regions in 
which they are applied. 

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COM(2011)169 of 13 April 2011. 

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(d) 

3. 

the application of regional reductions does not have the effect of granting a region a 
competitive advantage in intra-Union trade. 

The reduced rates must comply with the requirements of Directive 2003/96/EC, and 
in particular the minimum rates laid down in Article 7 

Article 2 

This Decision shall be applicable from 1 January 2013 and shall expire on 31 December 2015. 

However,  this  Decision  shall  expire  on  the  day  one  of  the  following  modifications  to 
Directive 2003/96EC becomes applicable: 

- the general system for the taxation of energy products is modified in a manner to which the 
present authorisation is not adapted; 

-  France  is  authorised  to  apply  differentiated  levels  of  taxation  at  the  level  of  the  French 
regions. 

This Decision is addressed to the French Republic. 

Done at Brussels,  

Article 3 

For the Council 
The President 

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