reuters
Fri Sep 9, 2005 8:22 PM BST
BRUSSELS (Reuters) - Cutting taxes on fuel is not the best way for EU member states to tackle the problem of rising oil prices as this would merely boost demand, the European Union executive Commission said on Friday.
"Once again the Commission has stated that reduction of fuel taxes is not the way to go on this," Commission spokeswoman Maria Assimakopoulou told a daily media briefing.
"What we need to focus on is reducing demand. Reducing tax rates runs the risk of increasing demand and the objective here is reducing demand," she said.
Asked about government initiatives to cut taxes on fuel to limit the effects of rising prices, she said it would be up to national governments to decide as long as the rate remains above an EU minimum of 15 percent.
Governments, however, should ensure that any such tax cuts or other measures do not violate EU competition rules, which seek to maintain an even playing field across the 25 member states, she added.
The comments by the European Commission come as EU finance ministers gather in Manchester to discuss how to respond to record oil prices.
The Commission on Thursday cautioned member states against unilateral steps to cushion the pain from higher energy costs on individual industries as this would merely trigger a spiral of demands from other member states.
France is planning to hand back some of the windfall receipts they make in petrol taxes that rise in tandem with pump prices, by sending a cheque for 75 euros (50 pounds) to each household.
Press reports say Belgium is also planning temporarily to cut its value-added-tax on heating oil once the price exceeds a certain threshold. The plan would replace an earlier idea for an energy cheque which has run into political opposition.
