THE Government approved on February 3 amendments to the Excise Duty Act that will introduce different duties on energy products used as fuel for heating and residential purposes, in farming and in forestry.
When used for heating and by residences, gas oil and kerosene will be subject to an excise duty of 50 leva for 1000 litres. A zero rate is proposed for natural gas and liquefied oil gas used for such purposes.
This differentiation will allow a reduction of industrial and household expenditures, which will favourably affect market prices and disposable income.
Control over liquid fuels subject to reduced excise duties will be exercised by marking the products. “Fuels with preferential excise treatment will be dyed with a chemical substance so that they are different from other fuels used for motor vehicles,” government tax policy official Lyudmila Elkova told journalists.
Sanctions will be imposed on fuel producers, wholesalers and fuel stations that sell fuel for agricultural or household use for other purposes. The fine will be up to 50 000 leva.
Exemption from excise duty is proposed for multiple-use energy products when they are not used as engine or heating fuel, for energy products sprayed into blast-furnaces as additives to coal fuel, and for energy products used in the generation of heat energy or electricity. Exemption will apply only to products supplied to duty-exempt end users, whose status is certified by the customs administration.
The waiver of excise duties on fuels for households was first proposed by the opposition as part of the 2005 budget-related legal amendments but Parliament rejected it on the second reading. The new act has to become effective from 2006 and is in line with the harmonisation of Bulgarian law with the European Union legislation.
A check by The Sofia Echo found that taxes on fuel are publicly described by EU members as environmental taxes, though they also serve to raise general revenue. All members of the EU apply value-added taxes to fuel, though a small number apply lower rates to gas and electricity. In addition to the full rate of VAT, transport fuels are taxed at rates which lead to taxation being over half and up to three-quarters of the final cost of petrol and diesel.
An EU directive requires that all energy products, except natural gas, should be subject to a standard minimum VAT of 15 per cent. Lower rates for electricity and transitional rates complicate the picture, and applied rates for electricity vary from five per cent (in the UK and Portugal) to 25 per cent (in Denmark, Finland and Sweden). Natural gas is usually taxed at the standard VAT rate, though it receives significant concessions in the UK, Greece and Luxembourg. Public transport receives concessional VAT rates in all members. In Bulgaria the VAT rate on all fuels is 20 per cent.
Excise and vehicle taxation differentials are used widely to encourage adoption of more environmentally favourable fuels. For example, the Netherlands provides vehicle tax cuts from July 2001 for petrol and diesel vehicles which meet the 2005 emission standards.
Meanwhile, the European Commission has proposed new legislation to promote the use of alternative fuels for transport, starting with the regulatory and fiscal promotion of biofuels, such as biodiesel and bioethanol. The regulatory package, which has not been adopted by the member countries but is subject to serious discussions includes an action plan and two proposals for directives, which would establish minimum biofuel content in transportation fuels and allow reduced taxation rates for biofuels.
According to the EC the use of fuels derived from agricultural sources (biofuels) is the technology with the greatest potential in the short to medium term. The action plan outlines a strategy to achieve a 20 per cent substitution of diesel and gasoline fuels by alternative fuels in the road transport sector by 2020.
The taxation directive proposal, which would modify the existing Directive 92/81 on excise duties, would allow member states, but not oblige them, to reduce excise duties on pure biofuels or biofuels blended into other fuels, when they are used for heating or transport purposes. The proposal would allow the countries to reduce excise duties in proportion to the percentage of biofuel incorporated in the fuel or end product. No such moves have been initiated in Bulgaria yet, and biofuels are not even considered a possible alternative to the conventional fuels yet.
Biofuels include biodiesel (a methylesther produced by reaction between a plant oil and methanol), bioethanol (ethanol produced though fermentation of sugar beets, cereals or other organic material), ETBE (ethyl-tertio-butyl-ether, which is etherised bioethanol), biogas (produced from biodegradable waste, basically methane), biomethanol (produced from biomass or biodegradable waste, equivalent to methanol from fossil fuels) and biodimethylether (produced from biomass or biodegradable waste for use as biofuel).
Biofuels currently represent about less than one per cent of diesel and gasoline consumption in the EU. However, in some EU countries, biofuels are already supported by preferential taxation within the existing regulatory framework and their share in the consumption is expected to rise.
When used for heating and by residences, gas oil and kerosene will be subject to an excise duty of 50 leva for 1000 litres. A zero rate is proposed for natural gas and liquefied oil gas used for such purposes.
This differentiation will allow a reduction of industrial and household expenditures, which will favourably affect market prices and disposable income.
Control over liquid fuels subject to reduced excise duties will be exercised by marking the products. “Fuels with preferential excise treatment will be dyed with a chemical substance so that they are different from other fuels used for motor vehicles,” government tax policy official Lyudmila Elkova told journalists.
Sanctions will be imposed on fuel producers, wholesalers and fuel stations that sell fuel for agricultural or household use for other purposes. The fine will be up to 50 000 leva.
Exemption from excise duty is proposed for multiple-use energy products when they are not used as engine or heating fuel, for energy products sprayed into blast-furnaces as additives to coal fuel, and for energy products used in the generation of heat energy or electricity. Exemption will apply only to products supplied to duty-exempt end users, whose status is certified by the customs administration.
The waiver of excise duties on fuels for households was first proposed by the opposition as part of the 2005 budget-related legal amendments but Parliament rejected it on the second reading. The new act has to become effective from 2006 and is in line with the harmonisation of Bulgarian law with the European Union legislation.
A check by The Sofia Echo found that taxes on fuel are publicly described by EU members as environmental taxes, though they also serve to raise general revenue. All members of the EU apply value-added taxes to fuel, though a small number apply lower rates to gas and electricity. In addition to the full rate of VAT, transport fuels are taxed at rates which lead to taxation being over half and up to three-quarters of the final cost of petrol and diesel.
An EU directive requires that all energy products, except natural gas, should be subject to a standard minimum VAT of 15 per cent. Lower rates for electricity and transitional rates complicate the picture, and applied rates for electricity vary from five per cent (in the UK and Portugal) to 25 per cent (in Denmark, Finland and Sweden). Natural gas is usually taxed at the standard VAT rate, though it receives significant concessions in the UK, Greece and Luxembourg. Public transport receives concessional VAT rates in all members. In Bulgaria the VAT rate on all fuels is 20 per cent.
Excise and vehicle taxation differentials are used widely to encourage adoption of more environmentally favourable fuels. For example, the Netherlands provides vehicle tax cuts from July 2001 for petrol and diesel vehicles which meet the 2005 emission standards.
Meanwhile, the European Commission has proposed new legislation to promote the use of alternative fuels for transport, starting with the regulatory and fiscal promotion of biofuels, such as biodiesel and bioethanol. The regulatory package, which has not been adopted by the member countries but is subject to serious discussions includes an action plan and two proposals for directives, which would establish minimum biofuel content in transportation fuels and allow reduced taxation rates for biofuels.
According to the EC the use of fuels derived from agricultural sources (biofuels) is the technology with the greatest potential in the short to medium term. The action plan outlines a strategy to achieve a 20 per cent substitution of diesel and gasoline fuels by alternative fuels in the road transport sector by 2020.
The taxation directive proposal, which would modify the existing Directive 92/81 on excise duties, would allow member states, but not oblige them, to reduce excise duties on pure biofuels or biofuels blended into other fuels, when they are used for heating or transport purposes. The proposal would allow the countries to reduce excise duties in proportion to the percentage of biofuel incorporated in the fuel or end product. No such moves have been initiated in Bulgaria yet, and biofuels are not even considered a possible alternative to the conventional fuels yet.
Biofuels include biodiesel (a methylesther produced by reaction between a plant oil and methanol), bioethanol (ethanol produced though fermentation of sugar beets, cereals or other organic material), ETBE (ethyl-tertio-butyl-ether, which is etherised bioethanol), biogas (produced from biodegradable waste, basically methane), biomethanol (produced from biomass or biodegradable waste, equivalent to methanol from fossil fuels) and biodimethylether (produced from biomass or biodegradable waste for use as biofuel).
Biofuels currently represent about less than one per cent of diesel and gasoline consumption in the EU. However, in some EU countries, biofuels are already supported by preferential taxation within the existing regulatory framework and their share in the consumption is expected to rise.
