30 January 1998

The French government said on Friday it has recommended changes in the standards used to calculate car taxes, which have traditionally favored diesel-powered cars. The joint statement from the environment, transport and finance ministries marked the government's latest move to redress years of policies favoring diesel.

In the most recent fuel tax rise, diesel tax was increased proportionately more than petrol tax.

The complex tax system on auto registrations and other items was established in 1956 and provided a 30% discount for cars with diesel engines, the statement said. More than 40% of new cars bought in France are powered by diesel engines—nearly double the European average—and France's biggest car maker PSA Peugeot Citroen is the leading maker of diesel engines.

The report submitted to parliament "concludes that there is a need to modify the rules taking into account, on the one hand, the power of the vehicle, and on the other, emissions," the statement said. "The new formula would not necessarily be disadvantageous for new diesel motors." The tax changes would apply only to cars registered on July 1 or afterwards and would have no impact on current car owners, it said.

The government said its proposal was in line with a parliamentary study issued in December that recommended incentives to spur motorists to buy cars running on cleaner fuels and an end to the preferential tax treatment for diesel fuel. The commission report, presented by Socialist Deputy Gerard Fuchs, said the government should gradually even out the differences in taxes on petrol and diesel fuel "to allow consumers to base their choices strictly on the respective qualities of the engines."

The ministries said taxes would not be increased as a result of the changes, which will be proposed in a bill to be put before parliament in the next few months.

Source: Reuters