Irish officials last night strongly denied a statement by Mr Frits Bolkestein, the EU Commissioner with responsibility for taxation policy and the internal market, that the Government had backed plans for a major increase in excise duty on fuel.
Mr Bolkestein told the Institute of European Affairs yesterday that energy taxes were set to converge upwards and said all EU member-states bar Spain were now in agreement on higher tax rates on petrol, diesel and other fuels.
He added Ireland had agreed to more harmonisation but had not yet agreed the level. He warned that the Commission could consider using other options such as new provisions contained in the Nice Treaty to get around the problem. The proposals, if implemented, would mean increases of up to 12 pence a litre on unleaded petrol as well as huge increases in home heating costs.
However, a spokeswoman for the Minister for Finance, Mr McCreevy, said Ireland had not agreed to the proposals.
Mr Bolkestein pointed out the tax on a litre of petrol was 40 cents higher in Northern Ireland than in the Republic. A "convergence of rates [on energy products] in the Union cannot be avoided" if the EU wanted to end the existing distortions of competition, he said.
Mr Bolkestein warned he was "conscious of the possibility offered by enhanced co-operation between at least eight member-states as developed at Nice, and this may provide opportunities in the field of taxation policy". The Department of Finance has said it will fight the proposals at the upcoming meeting of finance ministers. Ireland's peripheral location and dispersed population added to transport costs, it said.
The Commissioner insisted the taxes are needed to minimise carbon dioxide emissions and to cut energy consumption. The move would also reduce distortions in the single market, he added.
According to the Commissioner's spokesman, Mr Jonathan Todd, the Commission would like substantial increases in minimum taxation to be agreed in June for implementation from January 2002. They would be fully phased in over a number of years.