The EU Court of Justice ruled against Finland on November 27 with regard to the non-conformity of its tax system for gas oil used as heating oil, because the ineffectiveness of the system opens the door to fraud on a large scale, affecting even the neighbouring state of Sweden. The Commission took legal action against Finland in May 2000 (case C-185/00) because the country had not applied the Directives on the harmonisation of the structures of excise duties on mineral oils 92/81/EEC and 92/82/EEC. Although the Directives do not require an explicit ban on gas oil as a fuel for diesel vehicles, the Member States are bound to prevent its use. However, Finland permits the dual use of gas oil, which is taxed at a lower rate, on the basis of a prior declaration and by means of payment of a surcharge. If caught, offenders have to pay the surcharge three times. In practice, however, this option has not been used once in the last 10 years and all of the payments of tax penalties concern abuses discovered by monitoring systems.

Could the problem be solved by border checks? This is where the shoe pinches, at least for the European Commission and Sweden, which had been allowed back in January 2001 to intervene in the case in support of Commission conclusions. Since customs controls at the border between Sweden and...

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