Taxing commercial motor fuel in the European Union: the case for an apportionment-based, destination-principle system

Motor fuel is taxed by European Union member states where purchased. This article describes (a) the case for destination-based taxation of motor fuels, (b) economic distortions, incentives for destructive tax competition, and questionable division of tax base inherent in purchase-based taxation of commercial motor fuel, (c) loss of fiscal sovereignty inherent in minimum tax rates, imposed to alleviate the first two problems, and in uniform rates, (d) the apportionment-based system employed in the US and Canada and its advantages, (e) technology to determine distance traveled in each member state, and (f) legal and political obstacles to adopting an apportionment-based system.