[A-List] EU integration struggles

[Keaney Michael]

Tax harmonisation is the issue that tends to reverse the polarities of EU politics. Oskar Lafontaine's resignation as German finance minister in 1999 was welcomed by the Eurosceptic British press because "Red" Oskar had been pushing for tax harmonisation. This was not the reason he resigned of course. Now we have the utterly ridiculous situation where harmonisation of taxes on diesel fuel threaten to turn the European Commission into a laughing stock. A harmonised rate will seriously undercut the currently high level of duty levied on fuel in Britain. No wonder Gordon Brown is concerned to prevent such a measure. The Commission's response? Higher demand for fuel will result, thereby preserving Treasury revenue. So much for the champions of Kyoto! Meanwhile, the UK's argument is that there are no single market reasons for tax harmonisation, as opposed to the single market reasons for greater "labour market flexibility" that saw Blair line up with Aznar and Berlusconi prior to the Barcelona summit earlier this year. They should be careful though -- short term advantage over fiscal autonomy threatens to undermine the planned UK membership of the eurozone, as the single market reasons for tax harmonisation would, in that case, be much harder to deny. Meanwhile we have the poujadist punk Thatcherite road hauliers praising Europe, apparently wishing that the British government would "surrender sovereignty" to Brussels. Amazing.


EU fuel tax plan revives row
By Stephen Castle in Brussels
The Independent, 25 July 2002

The simmering row over tax harmonisation in Europe was reignited yesterday when the European Commission proposed a single rate for excise duty on diesel used by hauliers in all 15 member states.

The plan - certain to be opposed by several governments including the UK - aims to end the disparity between fuel costs in different countries.

For Britain, which has the highest rate of any EU country, the commission's proposal would mean a cut of almost 50 per cent on duty for hauliers. The Treasury could lose billions of pounds of revenue - though EU officials point out that the UK loses revenue anyway, because truckers avoid refuelling here whenever possible.

Under the plan there would be a rate of EUR350 (£220) of duty per 1,000 litres of commercial diesel fuel, with harmonisation by 2010. At present, duty in the UK is EUR742 (£470), compared to EUR401 (£250) in Ireland and EUR372 (£235) in Luxembourg.

The commission also wants minimum duty of EUR360 (£225) on diesel and unleaded petrol for privately used cars. In several countries, diesel is taxed at a lower rate.

The Road Haulage Association welcomed the plan, which comes almost two years after fuel protests in Britain brought parts of the country to a standstill. Karen Dee, director of policy, said: "We have been campaigning for a long time about the competitive disadvantage of British hauliers."

But the Government is threatening to veto the idea, which requires support from all 15 EU countries. A British official said: "The Government does not accept that there are single market reasons to justify a harmonised rate."

Frits Bolkestein, European Commissioner for the internal market, said the UK would not lose revenue because the cut would raise demand for fuel.