A growing popular movement against the introduction of the new ‘eco-tax’ on goods transport vehicles last month forced the socialist government to suspend the scheme that was to be launched on January 1st. But the emerging details of the contract signed under the previous conservative government with the company chosen to enforce the levy now place any introduction of the tax at all in serious jeopardy.
The contract was a partnership agreement signed in 2011 between the French state and Italian company Ecomouv’, which was assigned to create and manage the technical operation to charge and collect the tax, and which involves a complex system of vehicle tracking. Introduction of the tax has been repeatedly delayed due to recurrent serious technical problems in the system devised by Ecomouv'.
The very generous financial terms given to Ecomouv’, including a massive compensation payment in the case of the tax being abandoned, appear so surprising that a preliminary investigation into the conditions in which the deal was concluded was opened on Wednesday by the public prosecutor’s office. Meanwhile, a move is now also underway to create a parliamentary commission of enquiry into the issue.
The eco-tax, designed to encourage the transport of goods via the more environmentally-friendly means of rail and fluvial transport, targets commercial transport vehicles that use non-toll roads and is calculated on a per-kilometre rate of 0.22 euros.
Last month, Prime Minister Jean-Marc Ayrault ordered a suspension of the introduction of the scheme following a series of violent protests against it, most of them centred in Brittany. The north-western region, which largely relies on road transport for the export far and wide of its agricultural produce, has seen an alliance of farmers and agro-alimentary company employees unite in opposition to the tax which they argue will deal a crippling blow to their already-struggling businesses.
While Ayrault announced a series of national consultations with opponents of the scheme, allowing for possible modifications to the tax, the Breton movement demanded he scrap it altogether. They gave the government until Wednesday to announce it was abandoning the tax, which Ayrault has now refused, paving the way for an escalation of the conflict.
The protests have already involved the costly vandalising of equipment in place on the French road network to operate the system, notably in Brittany but also in other regions. As a result, some of the bridges set up above roads, containing truck-monitoring equipment, have been removed.
The conflict has caused considerable political embarrassment for the government, under strong pressure from its EELV Green party allies to maintain the tax and confronted by a revolt in Brittany where the socialists traditionally enjoy strong electoral support.
While Ayrault has offered to negotiate with the scheme’s opponents, implicitly allowing for financial aid for some, the government has made known that it would cost the public purse some 800 million euros if it was abandoned, of which a large part is the compensation that would have to be paid to Ecomouv’ as laid out in the contract signed by the previous, conservative government under President Nicolas Sarkozy.
Meanwhile, if the new tax is not effective by January 1st 2014, Ecomouv' is due to be paid 20 million euros per month in indemnities.
Public prosecutor Robert Gelli on Wednesday announced he had opened a preliminary investigation into how Ecomouv’ was awarded the contract. “It involves knowing whether there were, in the attribution of the contract, elements of a nature that go against the equal treatment that must prevail in public market [tenders],” he said. His move follows an earlier decision not to pursue an investigation, which Gelli said was reversed due to "certain things that have been recently spoken of."
Until now, the conservative UMP party has been keen to capitalise on the government’s dilemma over the future of the tax and the Ecomouv’ contract, which party leader Jean-François Copé has described as “absurd”. But the latest developments have shifted the focus off the government and onto a number of ranking UMP figures who were members of government when the Ecomouv’ contract was signed.
Not least among these is Nathalie Kosciuosko-Morizet, ecology minister under Sarkozy, who is now her party’s candidate for the post of mayor of Paris. She has described the contract as “totally transparent”. She has also surprisingly claimed that she did not initiate the contract, which she said was launched before and signed after her time at the ministry. In fact, the chronology of events show quite clearly that the closing of the tender process and the contract with Ecomouv’ were both approved by her, either signed directly by her or on her behalf.
“In France today we’re seeing a dance of the two-faced and the cowards,” snapped UMP party MP Thierry Mariani, who was transport minister at the time of the deal and who also signed the closing of the tender process that chose Ecomouv'.
The fine detail of the contract with Ecomouv' has never been made public, and a number of organizations which have applied for access to it have been met with official refusal. The latest example of this was a request made by the European road transport companies’ federation, the OTRE, which is opposed to the calculation methods of the tax and also to the involvement of the private sector in its collection. The OTRE was refused access to the contract on the basis that it contained “confidential industrial and commercial information”. The federation has now taken the matter to the French supervisory commission for access to administrative documents, the CADA, which is to pronounce on the matter on November 7th.
A system blighted by technical problems
Shortly after coming to power in June last year, the new socialist government considered abandoning the Ecomouv’ contract in order to place the whole process of collection of the eco-tax with the public services. Mediapart understands that, at the time, it estimated that the penalty for breach of contract would be 350 million euros. However, by September 2012 it decided to maintain the public-private partnership. “The preoccupation was to get the eco-tax working - the previous government having left us a dossier in an indescribable state - rather than getting involved in a legal dispute,” commented a well-informed source, speaking on condition of anonymity.
Administrations rarely choose to question past contracts signed by the State, and the fact that France’s Council of State, which advises the government on legal affairs, had validated the partnership with Ecomouv' appeared to give it a solid legal foundation. As for the operating cost, which involves a yearly payment to Ecomouv’ of 270 million euros, the conditions appeared normal. “If you take the cost per kilometer per lorry, which is a good unit of measurement, this contract is completely comparable to the tariffs applied in Germany or in Switzerland at around 0.22 euros per kilometer,” said a well-informed source, who underlined that the amount paid to Ecomouv’ is static, whereas the global tax returns can be raised.
But the government has a number of arguments at its disposal to contest the contract. Finance minister Pierre Moscovici has called for a review of the contract. “This company has not assumed its responsibilities and as a result we would be justified in contesting it given the non-execution of a certain number of requirements.”
Ecomouv’ chose to use a taxation system using GPS technology. It requires that every truck is fitted with a device that allows it to be tracked along its journey by satellite. The bridges that are placed above roads – and which have been the target of sabotage by protestors over recent weeks – are there to combat fraud by ensuring that trucks passing underneath are properly equipped with the tracking devices. When the contract was signed, the previous government hailed the system as “innovating”, but the technology has proven costly to develop and Ecomouv’, which has no previous experience in this field, appears to be struggling to master the complexities.
As of the beginning of 2013, it became clear that the company would not be able to make its system operational to the agreed agenda, beginning in Alsace, in eastern France, in April and the rest of the country by July. The delays were notably caused by computing issues that created anomalies both in the tracking of vehicles and the taxation rates, leading the transport ministry to announce, in February, that the introduction of the new tax would be postponed to of October 1st.
But the technical problems continued, leading the public administrative services to refuse on several occasions to deliver the first certificate of approval for the system, called the ‘verification of aptitude for proper functioning’. On September 5th, transport minister Frédéric Cuvillier again postponed the launch of the tax to January 1st.
The government had calculated obtaining 80 million euros per month in returns on the eco-tax, and that after payment due to Ecomouv'. Thus the delay in launching the system has already cost the public purse 400 million euros, although the contract signed by the previous government stipulates the company is liable to pay compensation of only 8 million euros per month of delays.
While the transport ministry has latterly suggested that most of the system’s technical problems are now resolved, there has been no information released in public about the trials carried out on a reported 4,500 trucks.
The road haulage lobby claim that there are still significant errors being found in both the tracking procedure and the billing of the tax. A number of transport companies have complained of problems in registering their vehicles to obtain the tracking equipment that must be installed in them. By the end of October, only 100,000 trucks of a total 800,000 on French roads were registered.
The system for collecting the eco-tax is expected to obtain official approval in mid-November. Mediapart understands that if ever this is delayed, the banks that provided the investment funds for Ecomouv’ are now threatening to demand that its shareholders act as guarantors that the loans will be paid back. Worse still, there are two further official certification and approval procedures the company must obtain before the system can launch.
“Frankly, I don’t see how they can be ready for January 1st,"commented a well-informed source, speaking on condition of anonymity. “Especially as the administrative officials are going to study things twice before signing off approval [certification]. No-one will take the risk of approving a system if it still has imperfections while a parliamentary commission of enquiry is going to be held and when a signature places at risk 800 million euros for the State.”
The source said he believed that if the system is not working properly the government had every weapon at its disposal to abandon the contract with Ecomouv’ at relatively little cost.
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English version by Graham Tearse