EU to propose energy tax breaks to help the poor

BRUSSELS (Reuters) - The European Commission will look at changing taxes to boost energy efficiency and help poor people hit by high fuel costs but will tread carefully over the possibility of so-called "Robin Hood taxes", a spokesman said.

The main policy response to soaring fuel costs must be energy efficiency to reduce dependence on imported fossil fuels, the European Union's executive arm said.

"Rising fuel prices are squeezing the purchasing power of all EU citizens, with the strongest impact on the lowest-income families in Europe," Commission President Jose Manuel Barroso said in a statement.

"I believe that through a structured response at the EU level -- possibly combined with targeted social policy measures by member states -- we can meet the challenge," he added. "We need to save energy, and to diversify the sources of supply."

The European Union executive said it will urge member states at a summit next week to take "targeted measures to help citizens that are hardest hit by the current situation".

Soaring oil prices have sparked protests in Europe and Asia. Many protesters blame high duties on fuel imposed by their governments as much as international oil prices.

The Commission said prices had risen largely because oil supply was struggling to keep pace with rising global demand, especially in China and India.

It said household heating fuel costs had risen 35.2 percent in the EU in the year to April, with transport fuel up 12.7 percent. It was also looking at the impact on fisheries, agriculture, transport, chemicals, automobile and renewable energy sectors.

ROBIN HOOD TAXES

Spokesman Johannes Laitenberger said the Commission would carefully consider so-called "Robin Hood taxes", designed to tax huge profits at energy companies and redistribute them to households that struggle to pay their fuel bills.

Energy companies have benefited from soaring prices of crude oil, refined products and gas, and stand accused of making "windfall profits" by handing on to customers the cost of permits to produce carbon dioxide that they received for free.

They say they need the profits to invest in new low-carbon energy sources such as windfarms, solar and wave power.

"All of these issues that are part of the debate at EU level and member state level are obviously being considered," he added. "It's still part of the fine-tuning."

"There is on the one hand a case to look at the situation, but also a case to make sure any measure that will be taken does not have a counterproductive effect for instance in terms of businesses capability to make the necessary investments in order to guarantee steady supply," he added.

The Commission said it would report in the autumn on the possible use of tax incentives, including reduced VAT rates, to encourage energy savings.

Last month, it deflected a call by French President Nicolas Sarkozy for the European Union to consider capping sales tax on fuel.

Any change in value-added tax on fuel would require unanimous agreement by EU governments and would be the wrong response to high petroleum prices, it said.

(Editing by Dale Hudson)