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Spain's illegal fuel tax

February 27, 2014

The European Court of Justice has ruled that a special tax levied by the Spanish government on some petrol products was not in line with EU legislation. Madrid looked likely to be in for a costly refund to companies.

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At the pumps
Image: Fotolia

Spanish businesses and a smaller proportion of private consumers could be in for a massive refund after the European Court of Justice on Thursday found that they were made to pay 13 billion euros ($17.8 billion) in petrol taxes which did not comply with European Union law.

The court said an indirect tax on certain petroleum products was in effect from 2002 until the end of 2012 which was not used for health and environmental spending despite being originally earmarked for these budget areas.

The court criticized the tax revenues in question had been used to plug budget gaps elsewhere which was not allowed under EU legislation.

Frustrating setback?

Spain had received and widely ignored early warnings from Brussels that the tax levied might be unjustified. Thursday's verdict was retroactive, applying to revenues already earned.

Spain leaves bailout program

Spanish Prime Minister Cristobal Montoro said he could not yet estimate the effect of the ruling on the finances of his country.

Madrid had committed to reduce its domestic deficit to 5.8 percent of GDP this year and below 3 percent by 2016 in line with EU requirements. But the looming refund might now make it harder for the government to meet those targets.

hg/msh (dpa, Reuters)