Thursday

26th May 2022

Commission wants capitals to give up energy tax veto

  • Flying is sometimes relatively cheap because of several tax exemptions (Photo: Nelson L.)

The European Commission renewed its push to remove member state vetoes in tax matters on Tuesday (9 April), by arguing the introduction of qualified majority voting on EU legislation on taxing energy.

"At present, there is just not enough policy coherence between the energy taxation framework and the energy and climate policies and objectives," said EU climate action commissioner Miguel Arias Canete in a written statement.

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He spoke ahead of the publication of a commission paper, which argued that in the field of energy taxation, member states should move from unanimous decision-making to qualified majority.

There is a qualified majority in the EU if 55 percent of the member states, representing 65 percent of the EU population, are in favour.

In January, the commission already announced it wanted to use the qualified majority rule for voting on a proposed new tax on large digital companies.

On Tuesday, the commission made the specific case for moving to qualified majority in the field of energy, as part of a larger package of Energy Union measures.

The commission argued that the EU's framework for energy taxation was "outdated" because it had remained unchanged since 2003.

In particular, the commission said that the patchwork of country-specific tax regimes in Europe were not allowing the EU to apply the 'polluter pays' principle.

It said that tax exemptions or reductions "notably in the aviation, maritime and road haulage and agricultural/fisheries sectors and for energy-intensive industries" were weakening incentives to use cleaner forms of energy.

An example of that was showcased at a recent railways conference in Utrecht, the Netherlands.

At a workshop about how to improve pan-European travel by train, one participant stood up to call on the audience to sign a petition, which argued travelling by train should be cheaper than flying when travelling distances under 750km.

"A major disadvantage is that there is no tax on kerosene," said the participant, Maarten Pijnacker Hordijk, an advisor at a railway infrastructure company.

He said the aviation sector had an unfair advantage over the railway sector, because of such tax exemptions.

"Everyone should be able to choose [their preferred mode of transport], but we should be made to pay the actual price, including the environmental impact," said Pijnacker Hordijk.

The commission is more careful in its paper, which does not argue specifically for taxation of kerosene.

It does state that tax exemptions or reductions "may promote inefficient and polluting modes of transport".

The commission also acknowledged that energy taxes can "steer behaviour in a way that meets wider societal needs and objectives related to the clean energy transition and climate change".

"Energy taxes should be designed in such a way that they provide notably for appropriate incentives to reduce emissions over time and improve resource efficiency, including through environmentally consistent tax rates across various energy carriers and fuels," it said.

But the question is whether member states will take the bait.

The previous commission paper on 'QMV', released only three months ago, was received tepidly.

In February, finance ministers met in Brussels to discuss it, and there was no consensus.

Even Dutch finance minister Wopke Hoekstra did not bite, after presenting a proposal for an aviation tax.

He told journalists after the meeting that EU finance commissioner Valdis Dombrovskis had quipped, after Hoekstra's presentation, that surely QMV would help the Dutch proposal get passed.

But the Dutch minister disagreed it was needed.

"Unanimity and good decision-making on important tax issues can go hand-in-hand," said Dutch minister Hoekstra in February.

"I think in the end you can have fast and good high-quality decision-making without QMV," he added.

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