Keywords: energy taxes, tax harmonisation, fiscal policy
The need for cross-border harmonisation of energy taxes in an interdependent world
The increasing international mobility of products, services and factors of production in recent years places constraints on national tax policies; it may be difficult for countries to set tax rates on mobile tax bases which are significantly higher than the rates levied elsewhere. This interdependence in national tax policies may give rise to a need for some degree of policy coordination, to ensure an appropriate balance of taxation between mobile and immobile tax bases and to restrict the ability of countries to exploit the mobility of tax bases to their advantage. At the same time, a number of energy-related environmental problems have a significant international dimension, calling for some degree of international coordination. Whilst such coordination has, to date, mainly taken the form of agreements on abatement targets, there are arguments which would point in the direction of harmonising the form of policy in addition to agreement on emissions targets. The above arguments for international coordination are applicable, in general, but the high degree of integration between European Union member states means that EU member states may need to pay particular attention to the tax policy problems created by mobility. At the same time, the institutional framework of the EU provides opportunities for coordination, monitoring and enforcement, which may significantly widen the scope for efficient and effective international harmonisation of energy taxes.