The taxes on electricity varies greatly in the European Union, in some states it is as low as 5%, whereas in others it can reach 57%. The European Commission now wants to harmonise the tax rates as a step towards building a single energy market in Europe. However, the biggest problem is how to cope with higher taxes without increasing the taxes for customers.
Malta has one of the lowest energy rates in the EU, currently at 5%, which is the same in the UK. Denmark has one of the highest taxes, currently 57%, and Germany has 49%. This is quite a difference, and will make it difficult to find common grounds. Similar discrepancies can also be seen in the gas prices.
The aim is to build a single energy market for the EU, not only by providing infrastructure and connections, but also by setting rules for network tariffs. According to Arias Cañete, the energy commissioner of the EU, the system is too complex, it should rather be transparent and follow clear rules for tariffs. A harmonisation of the prices could make Europe more competitive in the global market, as the tariffs are often much higher than in the US or other competing nations.
The harmonisation is aimed to be carried out over the next five years. At the moment, energy prices in Malta are still fixed for the next five years. The average price on the European market is currently 4.3 euro cents per KW. The Maltese government committed itself to paying an inflated 9.599 euro cents per KW to ElectroGas Malta Consortium. As confirmed by the ministry, there will be no new negotiations about the price. However, the price is lower than before and enables the government to reduce the tariff for commercial businesses in March 2015 by 25%. The tariff for residential households had already been reduced this year.
Since it is still unclear how the harmonisation will be carried out, and how countries are being affected, it is difficult to say what the future will hold for Malta. Currently one of the cheapest countries with regards to energy, the prices are unlikely to skyrocket. It is likely though that the prices in other countries that are higher taxed are going to decrease significantly.
One of the interesting aspects is the commercial tariff reduction, as it makes Malta more attractive for companies to move their operations to Malta. With the cheaper energy tariffs, lower income tax for top earners, the opportunity to save money through a tax refund, excellent infrastructure and a perfect climate, Malta has become a popular location for entrepreneurs and larger companies.
