Cyprus tax foul-up may force sole biodiesel producer to move to Greece

In Cyprus, a conflict over EU tax regulations may drive the country’s first biofuels producer out of the country. The producer was expected to be exempt from excise and VAT taxes, but the incentive was overlooked in the tax policy negotiations conducted during Cyprus’ 2004 entry into the EU, and the company faced a tax penalty for its 300 tonnes of annual biodiesel production. The company has announced that it may relocate to VGreece. Cyprus is currently far behind in biofuel production; the country has a consumption target of 1 percent compared to a sliding scale reaching 5.75 percent in 2010 for the EU as a whole. Diesel production has been exempt from most taxes in Cyprus for decades.

Last week, the European Biodiesel Board (EBB) said that saying that “biodiesel producers are experiencing dumping competition from [American] B99 blends. This competition is…putting out of business most EU producers.” The EBB represents 56 European producers and more than 80 percent of European biodiesel production.

The Board estimated that 800,000 tons of biodiesel have been imported from the United States by Europeans in 2007 to date, up from 100,000 tons for the whole of 2006. The Board points out that biodiesel producers in the US receive a subsidy of up to $300 per ton, and that as a result, US producers can export to Europe for less than the cost that Europeans pay for raw materials.

The German government announced that it would begin taxing the biodiesel business in August 2006, and the decision has thrown the industry into a tailspin. The German government has also indicated it will raise taxes in 2008. The German renewable fuels association, BBK, estimates that biodiesel production plants are operating at 40 to 50 percent capacity following the governments decision to tax the industry.

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