EU considers reviewing energy tax rules

The European Union is considering reviewing energy tax rules to allow faster cuts in the event of price spikes.

The European Union may be planning major changes to its energy tax rules to allow governments to cut taxes more quickly in response to unexpected price increases. The proposal comes in response to EU concerns about rising energy costs and their impact on households and businesses.

According to the design document that Reuters The EU has been notified that the EU has proposed revising energy tax rules to make them more climate-friendly. This includes taxing polluting aviation fuel, which currently evades EU-wide tariffs. The proposal was first put forward in 2021, but EU countries have struggled to agree on terms.

The latest draft compromise, spearheaded by Hungary’s rotating presidency, seeks to break the deadlock by allowing governments to cut energy taxes below the EU minimum if prices rise by more than 40% within three months. That would ensure a faster, more targeted response to energy crises like the one Europe faces in 2022, when gas prices soared to record highs after Russia decided to cut supplies.

Impact on families and the economy

The proposal said that large price increases could have a significant impact on households and the economy, requiring rapid action by governments. In contrast, the previous proposal would only allow tax cuts if energy prices rose by 70% in six months.

While the compromise aims to address concerns about rising energy costs, it leaves out the sensitive issue of taxes on shipping and jet fuel, which would require a “higher political level” to address. This is likely to become a sticking point in the negotiations, given strong opposition from some EU countries to the taxes.

Changing EU tax policy: very difficult and requires unanimous approval of all member states

Changing EU tax policy is a very difficult process and requires unanimous approval from all 27 member states. This means that any one government can block an agreement, making it difficult for the EU to reach consensus on the most pressing issues.

EU diplomats are due to discuss the compromise proposal on Friday, marking another crucial step in the negotiations. While the discussion continues, it remains to be seen whether the EU will ultimately agree on a revised energy tax policy that balances climate goals with economic interests.