French Government To Introduce Carbon Tax On July 1

by Ulrika Lomas, Tax-News.com, Brussels

Thursday, January 07, 2010

During a recent meeting of the Council of Ministers, French President Nicolas Sarkozy announced that the carbon tax will enter into force in France on July 1, according to government spokesman Luc Chatel.

This latest announcement follows the French President’s New Year’s address, in which he stated that he was not a man to give up at the first hurdle, and expressed his conviction that the “green” levy, designed to tax pollution, remains a key issue in France.

The government’s revised and amended carbon tax bill was initially due to be examined by the Council of Ministers on January 20. However, given the short timeframe, the complexities of the task, and the matter of the forthcoming regional elections in France, this deadline is clearly no longer achievable.

According to Luc Chatel, Ecology Minister Jean-Louis Borloo will instead present a simple “communication” to the Council of Ministers, and subsequently initiate a dialogue between all of the relevant parties.

The Constitutional Court had censured the original carbon tax plans of the government, declaring that the proposals were unconstitutional given that the tax fails to respect the fundamental principle of equality.

Fiercely criticizing the government’s decision to grant heavy industry exemption from the new carbon contribution, the court argued that these industrial companies are not due to pay carbon dioxide emission quotas until 2013.

In order to appease the Court and to take into account its recommendations, while at the same time endeavouring to protect French businesses, Finance Minister Christine Lagarde has advocated the introduction of a differentiated carbon tax rate on heavy industry in France, depending on the degree to which companies are exposed to international competition, and on the energy levels required for production.

The government intends, nevertheless, to maintain any measures that escaped the wrath of the Court, and to present the new bill to parliament after the March elections.