'Tank tourism': holidays not over yet

The EU commissioner responsible for tax and customs-related issues is set to table a proposal to raise the minimum level of diesel tax imposed by member states, in a bid to cut down on 'tank tourism.' However, given the lukewarm reception that the proposal has received so far, and the fact that unanimity is required, the proposal is unlikely to be adopted.

Laszlo Kovacs, Hungary's EU commissioner, has suggested an increase in the minimum level on national diesel taxes with a goal to eradicate 'tank tourism,' also known as 'fuel tourism,' whereby hauliers make detours to fill up in a state with cheaper fuel, resulting in lost government earnings and an increase in CO2 emissions.

The proposal is that the minimum duty be raised to E359 per 1,000 liters in 2012, representing an increase of 19% from current levels, and then to E380 per 1,000 liters in 2014. Currently, the amount of duty imposed by countries varies greatly, ranging from under E300 in countries that have recently joined the EU and have transitional arrangements, to more than E400 in four states, and E693 in the UK

'Tank tourism' has been a problem for the coffers of those countries that impose higher levels of duty than bordering countries. In Germany, it is thought that the government lost around E1.9 billion in 2004 as truckers filled up more cheaply in neighboring countries. Germany has some 1,000 retail stations close to its borders with Austria, France, the Czech Republic and Poland - countries where fuel taxes are much lower.

The proposal has not received a warm welcome by all states, especially those that benefit from the visitors. Luxembourg, where fuel retailers have invested heavily in service stations to exploit the numbers of vehicles coming into the duchy to fill up, has voiced concern over a potential duty increase. It is easy to see why hauliers make the detour into Luxembourg; in 2006 the average price of a liter of diesel in Luxembourg is E0.94 per liter, compared to E1.12 per liter in Germany and E1.10 per liter in France.

However, it is unlikely that those countries voicing concern, and fuel retailers, have much to worry about. Apart from the fact that, if adopted, the proposal would not become law until 2012, the European Commission is locked in an internal struggle over whether to adopt the proposal and, as all EU tax proposals need unanimous support from all 27 EU members, this will prove difficult at best.