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Page last updated at 17:02 GMT, Tuesday, 27 May 2008 18:02 UK

Sarkozy suggests cap on fuel tax

Nicolas Sarkozy
Nicolas Sarkozy said the price of oil was likely to continue to rise

The French president has suggested that the EU should consider capping value added tax on fuel to help countries deal with surging oil prices.

Nicolas Sarkozy warned there was no sign the oil price would dip and urged EU member states to consider his idea.

Fishermen across France are continuing to blockade ports and fuel depots in protest at rising diesel costs.

Mr Sarkozy said France, due to hold the EU's rotating presidency from July, was not alone in suffering high fuel costs.

Fighting inflation

"If the barrel continues to rise, must we maintain a VAT rate that is proportional to the price in the same conditions?" Mr Sarkozy said in an interview with French radio station RTL.

French consumers pay almost 20% VAT on the price of oil, which has risen to more than $130 (65; 82 euros) per barrel.

The question of taxes comes up very often but still we have doubts if it is the best way to react in these cases
Maria Assimakopoulou
EU taxation spokeswoman

Mr Sarkozy has indicated that he would like the sales tax brackets within the EU to be reviewed.

"Naturally, I can't decide it on my own," he said. "But I gather that France is not the only country confronted by the rise in the price of oil."

In Spain's north-eastern ports of Barcelona, Rosas and Port de la Selva, some 350 fishermen went on strike, mirroring the wider protests in France.

Meanwhile, in the UK, some 300 lorry drivers demanding a fuel tax rebate blocked a major route into the capital during the morning rush hour in protest.

Fishermen in Portugal and Belgium are also reported to be planning protests and Italy's Federation of Fishing Co-operatives is due to meet on Wednesday to discuss possible strike action.

The EU said such proposals would not be the best way to respond to high energy prices.

Commission taxation spokeswoman Maria Assimakopoulou said any change to the way VAT was calculated on fuel would need a proposal by the EU executive and a unanimous vote by member states.

"The question of taxes comes up very often but still we have doubts if it is the best way to react in these cases," she told Reuters.

A commission spokesman on energy said the best way to offset increased fuel costs would be to enable the fishing industry to pass on the increases to consumers.

Fishermen's friend?

The cost of a litre of diesel fuel for fishing boats in France has risen from 0.45 euros (70 US cents; 35p) to 0.70 euros ($1.10; 55p) in the past six months.

A policeman watches protests at Saint-Quay-Portrieux, western France
French fishermen say they are close to going out of business

Fishermen in Channel ports including Calais, Dunkirk, Dieppe and Boulogne are continuing their strike, blockading access into the ports.

They say the increase in diesel fuel costs will push them out of business.

Depleted fish stocks mean trawlers have to use more fuel to sail further out to sea, and strict EU fishing quotas mean the fishermen are limited in the amount they can catch and sell for profit.

Mr Sarkozy also said he was looking into how money from sales taxes on oil could be channelled back towards those hardest hit by the price rises.

The French president suggested this might amount to as much as 170m euros ($268m) each quarter.

"I would like to use all this money to finance aid," Mr Sarkozy said, adding that while haulage firms could put up their prices for customers, those in the fishing industry were in a more difficult position.




SEE ALSO
In pictures: French fishermen protest
21 May 08 |  In Pictures


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