In an effort to retain the concession, the UK developeda regime whereby pleasure boat ownerscould continue to use "red diesel" provided theyacknowledge that its use is only permitted withinUK waters, i.e. not in the rest of the EU.Council supports the main thrust of the initiative,namely to introduce fiscal incentives to achieve thecountry's climate and energy policy objectives, itnevertheless fundamentally rejects certain key aspectsof the text.However, the European Commission has pointedout that UK law does not require fuel distributorsto have two separate fuel tanks, i.e. one marked forred diesel and one for fuel subject to the standardtax rate. As a consequence, private leisure boat ownersoften do not have access to fuel subject to fullduty, placing these vessels at risk of heavy penaltiesif they travel to another member state's waters.Th e Commission has now formally requested thatthe United Kingdom should change the regime toensure that the use of red diesel is restricted to fishingvessels only. The UK has been given two monthsto comply with the request or the matter may beforwarded to the European Court of Justice.Swiss Federal Council RejectsEnergy Tax InitiativeThe Swiss Federal Council has rejected the popularinitiative calling for value-added tax (VAT) in theConfederation to be replaced by an energy tax.Submitted by the Green Liberal Party (GLP), theinitiative advocates that a tax be imposed on nonrenewableenergy in the Confederation, includingpetrol, gas, and oil, and recommends at the sametime that VAT be abolished. Although the FederalThe GLP makes clear in its initiative that the amountof the proposed energy tax should be set in such away as to yield the same revenue level as currentlyflows from VAT. The Federal Council argues, however,that such a high rate of tax could simply not bejustified by the pursuit of these environmental goals.The Federal Council emphasizes that it would notbe efficient to abolish VAT, given that this tax constitutesthe main source of fiscal income for theConfederation, and in view of the fact that it playsa key role in the financing of the country's socialsecurity system. At international level, VAT is consideredto be a highly efficient levy, whose impacton the economy is considerably less than from directtaxes, such as income or profit tax and socialinsurance contributions, the Federal Council adds.Furthermore, the Federal Council warns that replacingVAT with an energy tax would be disadvantageousfor businesses in Switzerland. The FederalCouncil points out that companies are barely affectedby VAT, as they are generally able to pass thetax on to consumers and as exports are exempt fromVAT, to guarantee international competitiveness.In contrast, an energy tax would affect exports, andwould also adversely affect low-income householdsin Switzerland, the Federal Council stresses.70
Finally, the Federal Council vehemently rejects theidea that the initiative could be implemented swiftly,within a few years, underscoring the importanceof allowing businesses and individuals sufficienttime to adapt to the measures.On May 25, 2011, the Federal Council decided toprogressively phase-out the use of nuclear power. Aspart of its Energy 2050 Strategy, the Federal Councilplans as a first step to introduce a number offiscal incentives to encourage individuals to use renewableenergy sources. From 2021, as part of thesecond phase, the Federal Council plans to replacethis incentive system with a steering mechanism, inthe form of a tax on energy.The Swiss Federal Department of Finance, the FederalDepartment of the Environment, Transport,Energy and Communications, and other departments,have been tasked with drawing up proposalsto facilitate the transition between the two systemsand to put forward proposals for the incentive system.These proposals are to be presented to the FederalCouncil by autumn 2013.71
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