TAX NEWS - June 2010

EU car groups warn on CO2 tax

European carmakers have vowed to oppose a new carbon tax if it results in higher prices for diesel oil - complicating policymakers' efforts to press ahead with the idea.

ACEA, the car industry trade group, says a carbon tax could punish European manufacturers, who are world leaders in diesel engine technology, while making it difficult for them to meet binding targets on greenhouse gas emissions.

"We are against it," said Ivan Hodac, ACEA secretary-general. "We need a large share of diesel in order to meet our target. This would jeopardise it."

Dieter Zetsche, Daimler chairman and ACEA president, also expressed concern about such a tax, suggesting that cash-strapped governments were pursuing it for fiscal rather than environmental reasons.

The stance by the powerful industrial lobby highlights the challenges confronting the European Commission as it seeks to build support for a carbon tax.

Algirdas Semeta, commissioner for taxation and customs, is expected to launch a formal debate on the idea this month.

Under a draft plan, transport and heating fuels would no longer be taxed based on volume, but on a calculation of carbon emissions and energy content.

Commission officials say the plan would not increase fuel taxes, but restructure them in order to encourage consumers to choose less-polluting alternatives, such as biofuels. That, in turn, would help advance the bloc's broader goals of fighting global warming.

But one of the chief consequences of the measure is that it could lead to higher prices for diesel, currently taxed less than standard petrol in most EU states, and heating fuel.