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EU proposes to boost tax on diesel in most countries by 2012

European Union regulators proposed to boost taxes on diesel truck fuel for most of the region in five years, to reduce differences in national rates and cut pollution.

The European Commission in Strasbourg, France, sought today to lift the minimum excise that governments must charge on commercial diesel by 19% in 2012. A second step in 2014 would reach 26% above the current floor. Some countries, which are currently exempt from the minimum, would see even larger increases. The commission aims to curb „tank tourism” of drivers going out of their way to fill up in cheaper countries. Germany, with the EU's second-highest excise after the UK, loses €3.6 billion ($4.8 billion) in tax revenue a year to neighbors such as Luxembourg, according to a study cited by the EU agency.

Tax differences „create significant distortions of competition among companies competing on the same markets and threaten jobs,” Taxation Commissioner László Kovács said in a statement. He also said, „This proposal would help the environment by reducing notably the unnecessary kilometers driven by truck drivers just to benefit from low taxes.” The proposal would force as many as 21 EU countries – all save the UK, Germany, France, Italy, Denmark and Sweden – to raise tax on truck fuel by 2014. All 27 EU nations must approve it for the plan to become law.

The International Road Transport Union, representing the trucking, taxi and bus industries, said the measure would simply raise prices for consumers. The Geneva-based group said concerns about driving across borders in search of cheap diesel are overblown. The IRU called instead for an EU-wide excise tax of less than the floor proposed by the commission. „The current proposal lacks the teeth necessary to bring about positive results,” said Hubert Linssen, head of the group's Brussels office, in a statement yesterday. Setting a single rate for the EU „is not realistic, given the existing situation, with wide differences in excise duties,” the commission said.

Yesterday's proposal seeks a bigger increase than a previously approved change scheduled in 2010. That first step would bring the minimum diesel excise rates from €302 per 1,000 liters (264 gallons) to €359, equal to the current minimum for regular gasoline. The second step, €380, aims roughly to halve the difference between lowest and highest rates in continental, Western Europe, the commission said. Several EU countries have exemptions or transition agreements letting them charge less the minimum. The lowest is €220 per thousand liters in Bulgaria, which joined the EU on January 1. At the top of the range is the UK with the equivalent of €693. Contrasts in closer proximity include Luxembourg, with a rate of €278, grating against Germany's €470 to the east and France's 392 euros to the west. (Bloomberg)