Michael McGrath (Cork South Central, Fianna Fail)
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Question 169: To ask the Tánaiste and Minister for Finance his views on a proposal regarding fuel for motor vehicles (details supplied). [11525/08]

Brian Cowen (Laois-Offaly, Fianna Fail)
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There is no proposal by the European Commission to further harmonise VAT in relation to petrol or diesel.

There is a proposal for a Council Directive amending the Energy Tax Directive regarding tax treatment of motor fuel for commercial purposes and the co-ordination of taxation of unleaded petrol and gas oil used as motor fuel. This proposal, published in March 2007, is aimed at tackling distortions of competition in the haulage markets which stem from wide variations in excise rates across Member States.

The Commission notes that such variations lead to fuel tourism whereby drivers, particularly in the haulage sector, will travel across borders to take advantage of cheaper fuel prices due to lower national taxes and the Commission highlights the negative environmental impact from such behaviour. In response, the Commission considers the best response is to raise the minimum rate for diesel from 2012 (and petrol from 2014). Some increase in the minimum rate for diesel has already been agreed from 2010 under the EU Energy Tax Directive (2003/96/EC) of October 2003. The planned increases together with the current EU minima and Irish rates are illustrated as follows:

Most Member States including Ireland welcomed the motive behind the Commission's proposal on environmental grounds. The actual impact of the changes proposed, from an Irish perspective, are minimalist and would only require a 1.2 cent increase in our national diesel rates by 2014. Some Member States are seeking greater flexibility with respect to the timelines in the proposal. Discussions are ongoing in this regard. Many of the new Member States either have an issue with raising the minimum rates or the fact that the transitional periods proposed by the Commission are not sufficiently accommodating. This is largely a function of the low excise rates in the Accession countries.