I assume the Deputy's question refers to Taxation of Energy Products, which the Commission published in March 1997 and not to the earlier proposals relating to carbon energy tax which are not being actively pursued by the Commission but which have not been formally withdrawn either.
The House will be aware of the earlier carbon energy tax that was proposed by the European Commission in 1992 and on which no agreement was reached. Following the failure to reach agreement on that proposal, the Commission introduced the proposed directive on the taxation of energy products in March 1997. The proposed directive suggested both increased taxes on items such as petrol and proposed new taxes on coal, gas and electricity. There were also complex arrangements to assist energy intensive industries with both obligatory and optional provisions for relief from the tax suggested. EU excise directives already require minimum rates for taxes on mineral oils, but taxes on electricity, natural gas or on coal etc. are not required. Ireland does not impose any additional excise taxes on natural gas, electricity, coal or turf. The Commission proposal provided for a three phased increase in existing mineral oil tax minima, the first of which was to come into effect on 1 January 1998. EU excises are expressed as minima and no upper limit is generally specified.
Ireland has expressed concerns on a number of occasions about the proposed directive. Our concerns relate to our peripheral status, the greater dispersal of population which adds to transport costs and the need to maintain competitiveness in the EU versus third countries. My particular concern as Minister for Finance is to ensure that any measures advanced to promote energy saving do not adversely affect Ireland's international competitiveness, particularly in relation to non-EU countries which compete with us and which may have very low taxes on energy. I am also concerned about the effect the imposition of any such energy tax would have on the consumer price index and how increased tax and new taxes would impact on the less well off members of the community.
It is important to emphasise that Ireland already has relatively high taxes on energy use, particularly those relating to motoring – value added tax at 21 per cent and vehicle registration tax at rates up to 30 per cent. Motor fuel taxes, while high, are significantly lower here than those applied in the United Kingdom, for example.
It is true to say that Spain and Ireland had difficulties at ECOFIN.
Additional Information
Spain has raised problems with the underlying principles of the proposal. At the ECOFIN meeting in May 1999, Spain referred to the negative effect the proposal may have on its economy in terms of inflation, loss of competitiveness, transport costs and consumer purchasing power. At the European Council summit in Cologne earlier this month, direction was given for a continuation of work on the framework proposals, bearing in mind the impact any agreement may have on the environment. My Department looks forward to working with the Finnish Presidency in this regard.
During his attendance at a conference in Dublin last Friday, I met with Commissioner Monti, who has responsibility for this area in the EU Commission. I made clear my reservations on the issue. However, I indicated to the Commissioner that Ireland would not wish to hold back the remainder of the Community and, therefore, would be willing to make every effort to reach agreement on the framework document bearing in mind, of course, my earlier remarks with regard to competitiveness and any adverse effects on the consumer price index and the less well off.