Fleet News

Diesel duty cut set to benefit minibus fleets

MINIBUS fleets throughout the country could slash their fuel bills under European Commission proposals to halve fuel duty in the UK.

The controversial scheme intends to harmonise fuel duty rates throughout Europe and if successful would slash UK fuel duty from 700 Euros (£437) per 1,000 litres to 350 Euros (about £224) per 1,000 litres.

The proposal would separate commercial diesel, defined as that used by vehicles over 16 tonnes, and that used by buses and coaches which can carry more than nine people, from diesel used by private individuals.

At the same time, countries with fuel duty rates lower than the agreed standard would have to increase their tax rates.

Commercial diesel would have its own tax band, while unleaded petrol and diesel for cars would continue to be taxed at the rates set by each country.

Experts suggest the loss in taxes to the Inland Revenue could be as high as £6 billion, while countries with lower rates of duty would have to impose tax increases.

The EC singled out the UK as the country with the highest fuel duty rates among member countries. It said: 'Those member states, such as the UK, which currently apply a rate of excise duty to diesel more than 1.5 times higher than the central community rate, would be able to apply a rate outside the fluctuation band for a period of seven years from 2003 but would have to adopt a convergence plan to bring their excise duty within the band by 31 December 2009.

'In practice, the ability of individual member states to pursue higher environmental protection goals or to raise additional revenue by applying much higher rates of excise duty on fuel than neighbouring countries is limited to some extent by the fact that their road hauliers and coach operators operating on international routes can simply buy their fuel in a neighbouring country.'

Industry pressure groups view the proposals as mostly style with little substance, as there is little chance of encouraging some countries to double the rate of tax they impose on fuels.

A spokesman for the Freight Transport Association, said: 'UK users pay tax on diesel of over 45p per litre while goods vehicle operators in Portugal and Greece pay just 15p per litre. This distorts competition and acts against the interests of both the UK transport industry and UK industry in general.

'But we are pessimistic regarding the chances of such harmonisation being achieved.'

  • For further details, go to www.europa.eu.int/comm/taxation_customs/whatsnew.htm
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