Proposal for a COUNCIL IMPLEMENTING 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: 2016-01-25
Institutions: Directorate-General for Taxation and Customs Union, European Commission
Subjects: France, derogation from EU law, fuel, fuel tax, lead-free petrol, regions of France, socioeconomic conditions, tax relief

EN 

   EN 

   EUROPEAN COMMISSION  Brussels, 25.1.2016  COM(2016) 20 final 2016/0007 (NLE)   Proposal for a COUNCIL IMPLEMENTING 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  
 
EXPLANATORY MEMORANDUM 

1. 

• 

CONTEXT OF THE PROPOSAL 

Reasons for and objectives of the proposal 

Taxation  of  energy  products  and  electricity  in  the  EU  is  governed  by  Council  Directive 
2003/96/EC 1 (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 2  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  2013/193/EU 3  (hereafter  ‘Decision  2013/193/EU’), 
following  up  on  Council  Decisions  2011/38/EU 4  and  2005/767/EC 5  (hereafter  ‘Decision 
2011/38/EU’  and  ‘Decision  2005/767/EC’),  authorised  France  to  apply,  until  31  December 
2015,  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, at present France has the possibility to apply 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 
de  consommation  sur  les  produits  énergétiques  –  Domestic  Tax  on  Petroleum  Products 
(TICPE), which is an excise duty. 

By  letter  dated  20  October  2015,  under  Article  19  of  the  Directive,  the  French  authorities 
requested the  renewal  of this scheme on identical terms, but  for a period of two years from 
1 January 2016  to  31 December  2017  and  with  a  smaller  authorised  amount  for  the  tax 
reduction.  

Operation of the measure 

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

The  regions  would  be  allowed  to  reduce  these  rates  with  an  amount  that,  could  not  exceed 
EUR 17.7 per 1 000 litres of unleaded petrol, including E10, and EUR 11.5 per 1 000 litres of 
gas  oil  throughout  the  derogation  period.  Every  year,  the  regional  Councils  will  decide  the 
amount  of  the  reduction  by  vote,  which  shows  that  the  decision  provides  autonomy  of  the 
regions and gives an incentive to improve the quality of their administration which cannot be 
achieved by a transfer from the national budget to the local budgets.  

1 

2 
3 
4 
5 

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). 
Commercial use of gas oil as defined in Article 7(2) and article 7(3) of Directive 2003/96/EC. 
OJ L 113, 22.04.2013 p.15 
OJ L 19, 22.1.2011, p. 13. 
OJ L 290, 4.11.2005, p. 25. 

EN 

2 

   EN 

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

Control and movement measures for the products concerned 

The  French  authorities  clarified  that  the  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 duty-paid fuel, the custom authorities 
could verify the origin of the product and its region of destination. In cases of atypical routes 
or  inexplicably  long  transport  times,  the  custom  authorities  can  investigate  whether 
consignments had been diverted from the regional destination initially declared. 

Arguments of France concerning the impact on the internal market 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 motor 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 
measure would not therefore distort competition in the transport sector or affect trade within 
the EU.  

Arguments of France concerning the period of application of the measure 

The French Government notes that the experience gained from each renewal of the package of 
measures  has  led  the  Council,  on  the  basis  of  a  proposal  from  the  Commission,  to  note  the 
total  absence  of  negative  consequences  resulting  from  the  measure,  both  for  intra-EU  trade 
and  for  the  general  level  of  taxation  of  fuel  in  France.  In  addition,  in  order  for  the  policies 
pursued  by  the  regions  to  be  assured  stability  and  a  reasonable  duration,  the  French 
Government  would  like  the  renewed  exemption  to  be  granted  for  a  period  of  two  years,  in 
accordance  with  the  objective  pursued  and  providing  the  regional  authorities  with  the 
visibility necessary for their activities. 

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:  

EN 

3 

   EN 

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 2013/193/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  objective  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.  

France confirms that the tax reduction will be preceded by a tax increase of the national rate 
as from 2016. 

During  the  period  of  application  of  Decision  2013/193/EU  (2013,  2014  and  2015 
respectively),  France  reported  that  two  regions  (Poitou-Charentes  and  Corse)  had  a 
differentiated lower rate;The other twenty regions did not apply differentiated lower rates. 

The two regions which applied the downward adjustment the reported GDP per capita below 
the national average in 2013. One of the regions in addition reported a higher unemployment 
rate compared to the average national level of unemployment in 2013.  

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 existing policy provisions in the policy area 

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 this has led to the adoption of Decision 2005/767/EC, Decision 2011/38/EU and 
Decision 2013/193/EU. As stated in these Decisions, the measures as described thereof 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  Decision 
2013/193/EU,  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 2016.  

In  this  context,  it  has  also  to  be  verified  whether  the  EU  policy  context  has  undergone  a 
relevant  change  since  the  adoption  of  Decision  2013/193/EU  or  risks  to  undergo  a  future 
change material to the assessment. 

EN 

4 

   EN 

• 

Consistency with other Union policies 

Internal market and fair competition 

The  risk  of  competitive  distortions  was  considered  to  be  low  as  Decision  2005/767/EC, 
Decision  2011/38/EU  and  Decision  2013/193/EU  set  small  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  is  set  namely  that  the  reductions  are  no 
greater than EUR 17.7 per 1 000 litres of unleaded petrol or EUR 11.5 per 1 000 litres of gas 
oil. This condition has been respected by France.  

The experience gathered with the application of the derogation does not put into question the 
assessment  reached  in  2005,  2011,  2013.  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. 

This  is  without  prejudice  to  the  application  of  the  Union  rules  on  State  aid,  notably 
Article 107(1) and (3) of the Treaty. 

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  2013/193/EU  noted  that  the  introduction  of  the  possibility  for  a  downward 
adjustment  of  rates  will  be  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  2013/193/EU  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. 

France will apply smaller reduction compared to the the previous years.  

2. 

• 

LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY 

Legal basis 

Article 19 of Council Directive 2003/96/EC. 

• 

Subsidiarity  

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

However,  pursuant  to  Article  19  of  Directive  2003/96/EC,  the  Council  has  been  granted  an 
exclusive competence, as a matter of secondary law, to authorise a Member State to introduce 

EN 

5 

   EN 

further exemptions or reductions within the meaning of that provision. Member States cannot 
therefore substitute themselves for the Council. As a result, the principle of subsidiarity is not 
applicable  to  the  present  implementing  decision.  In  any  event,  since  this  act  is  not  a  draft 
legislative act, it should not be transmitted to national Parliaments pursuant to Protocol No 2 
to the Treaties for review of compliance with the subsidiarity principle. 

The proposal therefore respects the principle of subsidiarity.  

• 

Proportionality 

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

• 

Choice of the instrument 

Instrument proposed: Council Implementing Decision. 

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

3. 

• 

RESULTS 
CONSULTATIONS AND IMPACT ASSESSMENTS 

EX-POST 

EVALUATIONS, 

OF 

STAKEHOLDER 

Ex-post evaluations/fitness checks of existing legislation 

The measure does not require the evaluation of existing legislation.] 

• 

Stakeholder consultations 

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 
and does not require an impact assessment. The impact on prices and climate is limited as 
differentiations were low and superseded by differences in retail prices among distribution 
networks. Consequently, there is little risk that the regional variations would lead to 
differences in retail prices that would induce traffic detours. 

• 

Regulatory fitness and simplification 

The  measure  does  not  provide  for  a  simplification  It  is  the  result  of  the  request  made  by 
France and concerns only this Member State. 

• 

Fundamental rights 

The measure has no bearing on fundamental rights. 

4. 

BUDGETARY IMPLICATIONS 

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

EN 

6 

   EN 

5. 

• 

OTHER ELEMENTS 

Detailed explanation of the specific provisions of the proposal 

Article 1 - The regions will be allowed to reduce the rates for unleaded petrol and gas oil used 
as motor fuel with an amount that cannot exceed EUR 17.7 per 1 000 litres of unleaded petrol, 
including E10 and EUR 11.5 per 1 000 litres of gas oil for a period of two years. 

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.  

The  national  measure  provided  by  this  decision  is  part  of  a  policy  designed  by  France  to 
increase administrative effectiveness by improving the quality and reducing the cost of public 
services,  as  well  as  a  policy  of  decentralisation.  It  offers  regions  an  additional  incentive  to 
improve the quality of their administration in a transparent fashion. 

Article 2 - The authorisation requested is granted with effect from 1 January 2016 for a period 
of two years, as requested by France.  

EN 

7 

   EN 

2016/0007 (NLE) 

Proposal for a 

COUNCIL IMPLEMENTING 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 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 electricity6, and in particular 
Article 19 thereof, 

Having regard to the proposal from the European Commission, 

Whereas: 

(1) 

(2) 

(3) 

(4) 

Council  Implementing  Decision  2013/193/EU  (hereafter  "Decision  2013/193/EU") 
authorises France to apply, for a period of three years, reduced levels of taxation to gas 
oil and unleaded petrol used as motor fuel for the purposes of an administrative reform 
involving  the  decentralisation  of  certain  specific  powers  previously  exercised  by 
central government. Decision 2013/193/EU expires on 31 December 2015. 

By letter dated 20 October 2015, France requested authorisation  to  allow the French 
regions  to  continue  to  apply  reductions  to  the  rates  of  taxation  no  greater  than 
EUR 17.7 per 1 000 litres of unleaded petrol and EUR 11.5 per 1 000 litres of gas oil 
for further two years after 31 December 2015. 

 Decision 2013/193/EU, which 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 
exclusively  tax  exemptions  or  reductions  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 
Union 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  decentralisation.  France  intends  to  offer  its  regions  an  additional 
incentive to improve the quality of their administration in a transparent fashion. In this 
respect, Decision 2013/193/EU requires that the reductions be linked to the objective 
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.  

(5) 

The  tight  limits  set  for  the  reduction  of  rates  on  a  regional  basis  as  well  as  the 
exclusion  of  commercial  gas  oil  used  as  propellant  from  the  measure  imply  that  the 
risk of competitive distortions in the internal market is very low. No obstacles to the 

6 

OJ L 283, 31.10.2003, p. 51. 

EN 

8 

   EN 

                                                 
(6) 

(7) 

(8) 

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. 

The measure will be preceded by a tax increase. 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. 

It follows from Article 19(2) of Directive 2003/96/EC that each authorisation granted 
under  this  Article  must  be  strictly  limited  in  time.  France  requested  that  the 
authorisation is granted for a period of two years. It is therefore appropriate to limit the 
period of application of this Decision to two years.  

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 
2016,  under  Decision  2013/193/EU.  The  authorisation  requested  should  therefore  be 
granted with effect from 1 January 2016. 

(9) 

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) 

(d) 

3. 

France is hereby authorised to apply reduced rates of taxation to unleaded petrol and 
gas oil used as motor fuel. Commercial gas oil used as propellant 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 17.7  per  1 000  litres  of  unleaded  petrol  or 
EUR 11.5 per 1 000 litres of gas oil; 

the  reductions  are  no  greater  than  the  difference  between  the  levels  of  taxation  of 
non-commercial gas oil used as propellant and commercial gas oil used as propellant;  

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

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 thereof. 

This Decision shall be applicable from 1 January 2016 and shall expire on 31 December 2017. 

Article 2 

EN 

9 

   EN 

This Decision is addressed to the French Republic. 

Done at Brussels, 

Article 3 

For the Council 
The President 

EN 

10 

   EN