Brussels, 11th February 2009
State aid: Commission opens in-depth investigation into Dutch tax exemption for natural gas used for production of ceramic products
The European Commission has opened a formal investigation under EC Treaty State aid rules into a tax exemption by the Dutch State for the delivery of natural gas used in installations for the production of ceramic products. As the proposed tax exemption only regards natural gas used by the Dutch ceramic industry, the Commission is of the preliminary view that this measure confers a selective advantage on the ceramic industry and would therefore constitute state aid. Such operating aid can be authorised only in exceptional circumstances, for example when it is related to environmental protection. At this stage The Netherlands has not demonstrated compliance with the EU Guidelines on State Aid for Environmental Protection (see IP/08/80 and MEMO/08/31). The opening of an in-depth investigation gives The Netherlands and interested parties the possibility to comment on the proposed measure.
On 24 April 2008, The Netherlands notified its intention to introduce an exemption for ceramic products from the energy tax on natural gas.
The Netherlands takes the view that the selective character of the exemption is justified by the nature and logic of the Dutch tax system and therefore does not constitute state aid. In support of this, they refer, on the one hand, to the unique position of the Dutch ceramic industry using the allegedly more energy intensive wet clay as a raw material and, on the other hand, to the allegedly disadvantaged tax position of Dutch producers vis-à-vis competing ceramic producers in surrounding countries.
The Commission is of the view that The Netherlands has not demonstrated that the proposed tax exemption is derived directly from the basic or guiding principles of the applicable national system on the taxation of energy products. The proposed tax exemption only regards natural gas used by the Dutch ceramic industry for production purposes and does not apply to gas used for all other mineralogical processes, which might be in a comparable situation as regards the use of energy products in their production processes. The Commission is therefore of the preliminary view that this measure would confer a selective advantage on the ceramic industry and thus constitutes state aid.
The Commission now needs to assess whether such aid is compatible with the Single Market. In the Commission's view, the proposed tax exemption falls within the scope of the Community Guidelines on State Aid for Environmental Protection (see IP/08/80 and MEMO/08/31). The Guidelines in particular allow tax exemptions, under certain conditions, where the tax without reduction would lead to a substantial increase in production costs which cannot be passed on to customers without leading to important sales reductions.
The Commission has requested The Netherlands to supply the relevant information, in particular regarding the necessity and proportionality of the aid and its effects on the ceramics sector. However, the Dutch authorities have not provided the requested information. As a consequence, the Commission is unable to assert compatibility of the measure without opening the formal investigation.
The Community Guidelines on State Aid for Environmental Protection explicitly allow exemptions from environmental taxes under certain specific conditions.
In point 70 sub 14) of the Guidelines an environmental tax is defined as "a tax whose specific tax base has a clear negative effect on the environment or which seeks to tax certain activities, goods or services so that the environmental costs may be included in their price and/or so that producers and consumers are oriented towards activities which better respect the environment". As energy is a 'specific tax base with a clear negative effect on the environment', the energy tax in The Netherlands – like all other energy taxes – is an environmental tax.
Chapter 4 of the Guidelines recognises the need for certain tax exemptions to enable Member States to operate ambitious environmental taxation, the rationale for such exemptions being to maintain the competitiveness of specific beneficiaries. The conditions under which such exemptions can be allowed aim to target aid to beneficiaries who genuinely need it because without reduction the tax would significantly increase production costs which cannot be passed on to customers without triggering important sales reductions (necessity of the aid). In addition, these conditions ensure that the aid is restricted to the minimum necessary (proportionality of the aid).
The non-confidential version of the decision will be made available under the case number N 210/2008 in the State Aid Register on the DG Competition website once any confidentiality issues have been resolved. New publications of state aid decisions on the internet and in the Official Journal are listed in the State Aid Weekly e-News.