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Ayrault: French fuel tax to be cut 'temporarily'

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Ayrault: French fuel tax to be cut 'temporarily'
Photo: Vincent Desjardins
12:31 CEST+02:00
French Prime Minister Jean-Marc Ayrault promised on Wednesday a modest and temporary cut to the taxes on petrol and diesel in order to reduce pump prices for drivers.

He said the reduction would come ahead of the introduction of a more permanent mechanism to regulate fuel prices, speaking in an interview on BFMTV and RMC radio.

Keeping a lid on pump prices which have soared to record levels was a prominent pledge of François Hollande's presidential campaign that swept the
Socialists  to power earlier this year.   

A lull in global oil prices temporarily removed it from the political agenda, but in recent weeks the price of crude has climbed and so have prices at the pump, squeezing consumers who are already feeling the pinch as the French economy stagnates.

But fuel companies had warned the government against slapping down a simple price cap, saying this would simply lead to shortages.

Ayrault also downplayed this option.    

"If you freeze prices for three months and then you free them, then you haven't resolved anything," said the prime minister.

The reduction in tax gives the state the right to "ask producers and distributers to also make an effort" to reduce pump prices, he added.

Ayrault said Finance Minister Pierre Moscovici would meet with fuel companies and consumer groups on August 28 to outline the government's measures.

He didn't provide any more details about the planned measures other than to say it would reduce the amount of tax in the cost of fuel and that it was not
a return to a variable rate.

"For the moment it will be a simple reduction" in the tax, said Ayrault, "but it will be modest and temporary."

However a reduction in the fuel tax, which under EU rules member states must keep within a certain range, will lead to a drop in revenue and could hurt the government's efforts to reduce its budget deficit to 4.5 percent of GDP this year.

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