CELEX: 51991PC0043
Language: en
Date: 1991-02-19
Title: PROPOSAL FOR A COUNCIL DIRECTIVE FIXING CERTAIN RATES AND TARGET RATES OF EXCISE DUTY ON MINERAL OILS

COMMISSION OF THE EUROPEAN COMMUNITIES
                                        C0MC91) 43 f i n a l
                                        Brussels, 19 February 1991
                       Proposal f o r a
                     COUNCIL DIRECTIVE
         fixing certain rates and target rates of
                excise duty on mineral oils
               (presented by the Commission)
 ---pagebreak---                                                - 2-
                                  EXPLANATORY MEMORANDUM
                                         INTRODUCTION
 1. The aim of this proposal is to complete and amend the
 Ie' P.9 proposal on the approximation of oxcif,.? duties i>:
 mineral oils, so as to have in place as soon as possible
 those measures essential for creating the internal market ir
 this area and, in particular for the abolition of fiscal
 frontiers.
 In the ' context of this objective, the proposai takes
 particular account of the aims of two other areas of
 Community          policy         - those            of    transport        and    of the
 environment. In the latter instance, the proposal reflects
 the line adopted by the Dublin European Council of 25 and 26
 June 3 990 on taking account of environmental concerns \r
 o ( ; o no m i c a n d    I. i s c a 1 m c a su r e s .
 2. It is important to set the context which this proper.a!
 i^as within the work of the Council.
 Negotiations on excise rates must be resolved within the
 Council by the end of 1991. For diesel in particular, the
 European Council has given a mandate to the Council to reach
 ng !"<••binent" b e f o r e  30 June       199.1.
 T h i s t e x t t h e r e t o r e f o r m s a n u r g e n t e l e m e n t in t h e conri-xt
 of d e c i s i v e p r o g r e s s in n e g o t i a t i o n s a t C o u n c i l   level on
 e x ci^'.e r ci t e s .
 3. This proposal is in conformity with Community energy-
 policy which particularly seeks to achieve stability in the
 energy market, to reinforce the security of the Community's
 supply and to encourage the development of more economic
 sources of energy.
4. Finally, this proposal, which ciims at abolishing fiscal
frontiers, forms part of the stance taken by the Commission
in setting down an overall strategy in the field of energy
and environment, in particular in combating the greenhouse
effect.
This proposal, incorporating                             a signal         in favour of
environmental protection, is therefore not exclusive, but
complements other initiatives taken and to be taken by the
Commission in the area of reducing the greenhouse effect.
 ---pagebreak---                               -3
1. OUTLINE OF THE APPROACH
1.1 In its proposal on the approximation of the rates of
excise duty on mineral oils made in 1989(1) the Commission
has put forward for petrol, a system which includes a
minimum rate and a target rate, the characteristics of which
are the following:
- the minimum rate of excise duty must be implemented by
  each Member State as from 1 January 1993;
- the target rate represents the common level towards which
  Member States must progressively converge.
In the case of diesel, because of its different nature
 (mainly commercial usage and purchased by end-users in
larger quantities), Member States would be obliged to bring
their rates into conformity with a relatively restricted
rate band. This would be binding on the Member States from 1
January 1993.
1.2 In the above-mentioned proposal the      minimum rate    for
leaded petrol was fixed at 337 ecu per        1000 litres.   The
minimum rate for unleaded petrol was fixed    50 ecu lower  than
the rate applicable to leaded petrol,        i.e. 287 ecu    per
1000 litres.
1.3 The target rates for petrol were not determined at the
time, so that account might be taken of the requirements of
specific    policies   such    as   transport,    energy,    and
environment. The Commission gave a commitment to making a
proposal on target rates for petrol before 31 December 1990.
The object of the present proposal is to complete- the
abovementioned proposal by setting up target rates of excise
duty for petrol.
1.4 The 1989 proposal further provides that the level of the
different rates will be subject to reexamination every two
years,    taking    particular    account   ol     the    policy
considerations set out in para. 1.3. In the light of the
recent developments in these fields, especially environment
and transport, the Commission is availing of the current
proposal to update the rate band for diesel.
(1) C0MC89) 526.
 ---pagebreak---                           -4 -
This is particularly apposite in the light of the request
from the recent Rome European Council which seeks that the
Council should reach a decision on the harmonization of the
various impositions on commercial road transport (excise
duty on diesel, annual circulation taxes and road tolls) by
30 June 1991.
2. THE TARGET RATE OF EXCISE DUTY ON PETROL - LEADED AND
   UNLEADED
2.1 Rates currently in force.
The graphs in annexes la and lb show the rates of excise
duty in force on 1 September 1990 on leaded and unleaded
petrol in the Member States.
2.2 Importance of the excise duty on petrol
Of these mineral oils, the most significant is petrol,
accounting roughly 60% of the excise duties on mineral oils
and almost 4 0% of all excise revenue in the Community. Its
use is almost entirely for personal private transport.
2.3 The establishment of a target rate for petrol must take
account of the updating of the former values, of the
environmental aspects, and of the case of unleaded petrol.
2.4 Basis for the target rate
In 1987, the common rate of excise duty proposed for leaded
petrol was 340 ecu per 1000 litres*2). In 1989, the
Commission proposed a minimum rate for petrol of 337 ecu per
1000 litres. Such a proposal is consistent with a target
rate of 450 ecu, especially when taking into account the
need to maintain the real value of the figure.
2.5 Taking account of the problem of CO., emissions.
Consideration of the problem of C02 emissions is an
important point given the commitment of the Community in the
context of the 2nd World Climate Conference in Geneva to
stabilize C02 emissions at their current level by the end of
the century.
A first step in this direction will be to take account of
these considerations in calculciting the target rate of
excise duty on petrol.
(2) COM(87) 327.
 ---pagebreak---                             - 5-
Indeed, it must be acknowledged that a significant part of
polluting emissions of carbon dioxide (C02) comes from the
use of petrol for personal private transport.
The target rate for petrol should be fixed at a levai
sufficient to raise the consumer's consciousness about C02
pollution and its implications for the environment and in
particular the greenhouse effect.
The present proposal is therefore based on the principle
that the excise rate for petrol should include a supplement
for C02 content. This supplement has been fixed at 4 5 ecu
per 1000 litres of petrol which corresponds to a level of 65
ecu per tonne of carbon.
Accordingly, the long term target rate of excise duty for
leaded petrol shall be 495 ecu (i.e. 450 plus 45) per 1000
litres.
2.6 The case of unleaded petrol
In the case of unleaded petrol, a differential of 50 ecu per
1000 litres below the minimum rate for leaded petrol was
specified in the above-mentioned proposal of 1989. This
gives an effective minimum rate of 287 ecu per 1000 litres.
At 1 January 1991, the differential between the rate applied
to unleaded petrol and leaded was as follows:
BE DK DE EL ES FR IE IT LU NL PT UK
3 5 0 2 3 4 66 3 8 52 3 4 4 1 2 4 2 0 66 4 2
 (ecu per 1000 .1 i Ire:;)
The level and nature of the differential       in  favour of
unleaded petrol must be considered.
It is useful recalling the background to introduction ** of
this practice in the mid 80s. It was intended to offset some
element of the incremental costs involved in refining and
distributing of what was then a new product.
There was also some element of tax-generated price reduction
to encourage the conversion process among consumers. The
fact that the rate of conversion has been highest in those
Member States where the differential has been greatest has
corroborated the correctness of the policy.
It has already been pointed out in the 1989 proposal that as
the market share of unleaded petrol increases, the extra
costs referred to above will decrease. It therefore follows
that the element of cost compensation should be gradually
reduced as the need for it disappears. However, since the
 ---pagebreak---                          -6
rate of change to unleaded is not constant across th
Community, it is, at this stage, difficult to take
definitive position. For this reason the differential fo
the target rate of unleaded petrol is being retained for th
moment at 50 ecu per 1000 litres, which is the same level a
proposed for the minimum rate in the above-mentione
proposal of 1989.
Accordingly, the target rate for excise duty on unleade
petrol is set 50 ecu below the target rate for leade
petrol, i.e. 445 ecu (495 minus 50 ecu).
3. AMENDING THE BAND OF EXCISE DUTY RATES PRESCRIBED FO
ROAD DIESEL
3.1 The rates currently in force
The rates of excise duty in force in the Member States on
September 1990 can be seen in the graph in annex 2.
3.2 Transport policy considerations
Discussions on the need for approximation of the variou
charges on commercial road transport (diesel excises, annua
circulation taxes and road toll:;) arc now at an advance
stage. The deadline of 30 June 1991 set by the Europea
Council of Rome (14 and 15 December 1990) for reaching
decision on these matters adds urgency. There is i
addition, general acceptance that the diesel excise rat
should be increased in order to allow a better coverage o
the infrastructure costs. It is therefore appropriate tha
the Commission should address this point in its curren
proposal.
3 . 3 C02 content
The arguments set out above for a supplement in respect c
the C02 content of petrol apply equally to the othe
principal road fuel, which is diesel. Not to so do woul
simply encourage long term substitution by private motorist
and thus defeat the aim of the move which is to stabiliz
C02 emissions at the current level by the year 2000.
Accordingly, the excise rate band on diesel proposed her
should be fixed at a level high enough to take account o
the problems of C02 emissions.
 ---pagebreak---                          - 7-
3.5 Widening of the band
As an initial step in the phase of approximation, it is
proposed to increase the width of the band rate from 10 to
25 ecu, to facilitate the process of adjustment. At the same
time, the final goal of a uniform common rate for diesel
remains as was the case in the 1989 proposal.
3.5 Composition of the rate
Accordingly the band rate proposed for diesel is from 245
ecu to 270 ecu.
4. OTHER MINERAL OILS
4.1 Kerosene
As was stated in the 1989 proposal, kerosene should be
treated according to its use. When used as a propellant, the
charge should be the same as for petrol.
The 1989 proposal put forward a minimum rate on kerosene
when used as a propellant of 337 ecu per 1000 litres.
Accordingly, the target rate proposed for kerosene used as a
propellant is 495 ecu per 1000 litres.
4.2 Other mineral oil products
The present proposal concerns only those mineral oils used
mainly as propellants - i.e., petrol and diesel. Together
they account for over 90% of the excise revenue generated
from mineral oils within the Community.
Besides, these other products were covered by the 1989
proposal and the marginal significance of their use as
propellants would not justify modifying the 1989 proposal at
this point.
Accordingly the treatment of these other oil products would
go beyond the scope of the current proposal and for this
reason the questions raised are not addressed here.
 ---pagebreak---                                                        - 8 -
                                                 Proposal f o r a
                                               COUNCIL DIRECTIVE
                        f i x i n g c e r t a i n r a t e s and t a r g e t r a t e s  of
                                    e x c i s e d u t y on m i n e r a l  oils
 THE COUNCIL OF THE EUROPEAN COMMUNITIES,
 Having r e g a r d t o t h e T r e a t y e s t a b l i s h i n g t h e Europea
 Economic Community, and in p a r t i c u l a r A r t i c l e 99 t h e r e o f ,
 Having r e g a r d t o t h e proposal from t h e Commission,
 Having r e g a r d t o t h e opinion of t h e European P a r l i a m e n t ,
 Having r e g a r d              to     the       opinion        of      the      Economic and         Socie
 Committee,
Whereas Council D i r e c t i v e                                                                  ,<1> i a i
down a minimum r a t e of e x c i s e duty on p e t r o l                                                thi
 i n s t i t u t i n g a p r o c e s s of convergence; whereas to complete thi
p r o c e s s i t i s n e c e s s a r y t o f i x a t a r g e t r a t e of duty towarc
which Member S t a t e s w i l l converge;
 Whereas          the       said        Directive           provides        for       a   periodic     revie
of       the        various         rates         of       duty     and      it       is   now   appropria
 that        the      rate         band         for      diesel       be      reconsidered,
HAS ADOPTED THIS DIRECTIVE:
(1)     OJ No C 1 6 , 2 3 . 1 . 1 9 9 0 , p .        10.
 ---pagebreak---                                                            - 9 -
                                                       ARTICLE 1
&:::• &v..• v«; A»..:£raM^fcjDfon«ary^ 1 9 S 3 , jfche.?.-- t a r g e t . r a f c e ^ j & f ~ . : e x c i s e ^ u f c y ^ ^ s 
         .^jtafigiKbe£^                                       -Meafoer '. S t r a t e s ^siïa'lfï^vmâkè^^thfei*^^
           Wtes &:convetge>^ sha 11 •.- be          ECOi495      per    1000      l i t r?es >. ï .^- ^%uv^.,^r^ ;.;• K ;
                                                       ARTICLE 2
           As from 1 January 1993, the target rate of excise duty on
           unleaded petrol, shall be ECU 50 lower than the target rate
           applicable to leaded petrol as defined in Article l.
                                                       ARTICLE 3
           As from 1 January 1993, t h e r a t e of                            e x c i s e duty on          diesel
           shall      be     not    less   than   ECU 245       or   more      than      ECU 270      per   1000
            litres.
                                                        ARTICLE 4
            As   from       1    January 1993,     the     target    rate      of     excise       duty   on    kerosene
            intended          for    use   as  a propellant            shall       be      ECU 495      per     1000
            litres.
                                                        ARTICLE 5
            Member S t a t e s s h a l l b r i n g i n t o f o r c e t h e l a w s , r e g u l a t i o n s
            and a d m i n i s t r a t i v e p r o v i s i o n s n e c e s s a r y t o comply w i t h t h i s
            D i r e c t i v e n o t l a t e r than 31 December 1 9 9 2 .
            When Member           States    adopt    these     provisions,         these       shall    contain      a
            reference         to   this    Directive      or   shall     be     accompanied         by   such
            reference         at   the   time   of    their     official        publication.         The   procedure
            for    such       reference     shall    be    adopted     by     Member        States.
                                                         ARTICLE     6
            This    Directive         is  addressed      to the    Member        States.
            Done at Brussels,                                                              For the Council
                                                                                            The President
 ---pagebreak--- Annex 1a
   LEADED PETROL EXCISE RATE
      Comparison of national rates since 1987
         ecu per 1000 litres
                                                                         O
                                                                         I
          BE         DE         EL           IT        NL      ES
                DK          FR         IE         LU      GB          PT
                      Proposed target rate of 495 ecu
                                Minimum rate 337 ecu
                01.04.87      M 01.09.89        01.09.90     21.01.91
 ---pagebreak--- Annex 1b
        UNLEADED PETROL EXCISES
       Comparision of national rates since 1987
         Per 1000 litres
    700
          BE           DE           EL           IT          NL
                DK           FR           IE           LU        GB           PT
                       Proposed target rate of 445 ecu
                                  Minimum rate 287 ecu
                 01.04.87     f M 01.09.89      C Z l 01.09.90  1111 21.01.91
 I rates expressed in current ecu
 ---pagebreak---  Annex 2
            DIESEL EXCISE RATES
   Comparison of national rates since 1987
     ecu per 1000 litres
400
300 H
200
                                                                  I
100
  0
      BE         DE          EL       IT        NL      ES
            DK          FR         IE     LU       GB          PT
             Proposed rate band from 245 - 270 ecu
            01.04.87       1 01.09.89    01.09.90     21.01.91
 ---pagebreak--- PRICE