EU’s revised bunker tax could be delayed indefinitely
The revised European Taxation Directive (ETD) that was meant to tax heavy fuel oil (HFO) and gasoil sales to ships in EU ports has been put on hold, the European Parliament tells Engine.
PHOTO: European Parliament headquarters in Strasbourg, France. Getty Images
The ETD has not been revised since it first came into force in 2003. The EU has been working to revise the ETD to make it more in sync with its Fit for 55 package that aims to reduce the block's greenhouse gas emissions by 55% by the end of the decade.
The proposal for a revised ETD sets out minimum excise duty rates for taxation of energy products including bunkers. Under the proposal, all bunkers sold in the EU and used on voyages within the EU would be taxed. It was supposed to be implemented in January next year, but has now been delayed.
“The ETD file is put on hold (frozen) in the light of the ongoing energy crisis and the file will be reassessed in March 2023,” a European Parliament representative told Engine.
The ETD proposal was put forward by the European Commission in July 2021, but was later stalled by EU member states citing concerns over the ongoing energy crisis.
As ETD is a tax file it has to undergo special legislative procedures. A final legal text needs unanimous approval from all the 27 members states of the EU Council, while the European Parliament "has no significant say in the final text", sustainable shipping officer Jacob Armstrong of clean transport NGO Transport & Environment (T&E) says.
"Negotiations have already been delayed until next year and given strong political differences on the topic, it is possible that the shipping parts of the ETD are delayed even later," Armstrong says.
Certain EU member states are against taxes on bunker fuels and are blocking the procedures.
If an ETD proposal is eventually made into law, then it could lead to added cost for bunker purchases in the EU ports. About $38-40/mt for MGO and HFO bunkers, and nearly $25/mt for LNG, according to estimates from ro-ro shipowner United European Car Carriers (UECC) and consulting firm CE Delft.
CE Delft thinks that if a revised ETD for shipping is introduced in EU ports it could force shipowners to bunker elsewhere and avoid taxes. A tax might could dent demand by erasing bunker price advantages in the ARA hub against bunker hubs in other regions.
By Nithin Chandran
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