EU fuel tax plan revives row

The simmering row over tax harmonisation in Europe was reignited yesterday when the European Commission proposed a single rate for excise duty on diesel used by hauliers in all 15 member states.

The plan – certain to be opposed by several governments including the UK – aims to end the disparity between fuel costs in different countries.

For Britain, which has the highest rate of any EU country, the commission's proposal would mean a cut of almost 50 per cent on duty for hauliers. The Treasury could lose billions of pounds of revenue – though EU officials point out that the UK loses revenue anyway, because truckers avoid refuelling here whenever possible.

Under the plan there would be a rate of €350 (£220) of duty per 1,000 litres of commercial diesel fuel, with harmonisation by 2010. At present, duty in the UK is €742 (£470), compared to €401 (£250) in Ireland and €372 (£235) in Luxembourg.

The commission also wants minimum duty of €360 (£225) on diesel and unleaded petrol for privately used cars. In several countries, diesel is taxed at a lower rate.

The Road Haulage Association welcomed the plan, which comes almost two years after fuel protests in Britain brought parts of the country to a standstill. Karen Dee, director of policy, said: "We have been campaigning for a long time about the competitive disadvantage of British hauliers."

But the Government is threatening to veto the idea, which requires support from all 15 EU countries. A British official said: "The Government does not accept that there are single market reasons to justify a harmonised rate."

Frits Bolkestein, European Commissioner for the internal market, said the UK would not lose revenue because the cut would raise demand for fuel.