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Food Production First in Fuel Duty Debate

Farmers and politicians will unite behind calls for Europe to put food production first in any debate this week around fuel duty rebates and increased taxation on the fuel that farming uses according to NFU Scotland.

The European Commission’s draft proposal on energy taxation changes, likely to be unveiled sometime this week, would look to remove existing tax reductions for the fuel used in sectors like agriculture with a suggestion farmers could also face a new energy consumption tax based on carbon dioxide. These measures are part of a leaked draft proposal to encourage agriculture to be more energy-efficient.

As well as industry opposition, the proposals are likely to come up against considerable political resistance from certain Member States.  The Union believes as many as 17 Member States currently give tax allowances on agricultural fuel, including the UK.  Any new legislation on taxation would require unanimity from all EU members and, at the moment, such agreement would appear to be unlikely on this issue.

NFU Scotland Policy Director Scott Walker said:

“With regards to fuel efficiency, those driving this green energy agenda need to bear in mind that there are very few savings left that a farmer can make.  That is why any EU proposals to hike up the fuel tax on red diesel would make little sense.  They would increase production costs on farm, at a time when food prices to consumers are already rising, and there would be little or no gain for the environment.

“With record oil prices, there isn’t a farmer in the country who is going to use more fuel than is absolutely necessary.  Even with the current levels of tax rebate for non-road use, red diesel is still a huge input cost and at farm level, many farmers are doing what they can to be as fuel-efficient as possible.  Modern machinery is increasingly geared towards low fuel usage and many farming techniques are now designed around reducing fuel consumption.

“Although yet to be officially released, this is a very contentious draft dossier and one which many European governments will feel strongly about.   As most Member States offer red diesel discounts, we are likely to get strong support both politically and from our fellow European farmers for rebated fuel to remain available to those involved in primary production.

“Other EU Departments, such as DG Agri, must also recognise that these proposals would make food production in the EU less competitive and we will be encouraging them to reject them at this early stage.”    

Notes to Editors

  • A proposal for amendments to the EU energy taxation directive is due to be published by the EU Commission (DG TAXUD) on Wednesday 13 April 2011.
  • The expected proposal will seek to amend the current legislation, which dates back to 2003, in order to produce a shift in taxation within the EU towards the EU’s energy and climate change objectives and away from the traditional taxation of labour. The aim would be to reduce overall energy consumption, encourage greenhouse gas emission reduction and encourage renewable energy. Essentially this would mean moving towards the taxation of both energy use and the content of the fuel used.
  • The key concerns for agriculture are:

- The impact of any proposals which impose a minimum rate of duty on road fuel which in turn results in an increase in the level of duty on red diesel.

-  The impact of imposing a minimum rate of duty on fuel used for heating in agriculture or horticulture.

-  The impact of additional taxation based on energy consumption.

-  The extent and availability of any transitional measures to agriculture and horticulture.

-  The impact on EU agriculture’s competitiveness

  • It should be borne in mind that under the Lisbon Treaty member states have a veto on taxation, which means that the proposals will require unanimous approval.
  • Directive 2003/96/EC currently allows Member States to apply a level of taxation down to zero on fuel used for agricultural, horticultural, forestry and fishery operations and associated uses.

Ends

Contact Bob Carruth on 0131 472 4006

Date Published:

News Article No.: 66/11


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