Sharpening knives

Et voilà: just a few months after concessionaires and the French government agreed to spend €1 billion to make roads “greener”, the environment now threatens to reignite a dormant war between the two parties.

Sanef: one of the
 concessionaires facing
tax threat 

The first warning shots were fired by Daniel Bursaux, the government’s general director for transport, infrastructure and sea, after he told a recent interviewer: “When the truck toll is introduced, traffic will shift to highways, and this windfall may justify a talk [with highway operators].”

The truck toll Bursaux is referring to concerns a green tax that will start being charged by 2012 to heavy vehicles circulating on public roads. Since the tax is expected to push trucks away from public roads and onto private highways, Bursaux argues concessionaires should help financially mitigate the transition, as this is “changing the deal a bit”.

Concessionaires, unsurprisingly, don’t share his point of view: “This is not new,” said the head of a well-known French concessionaire. “The government has been trying to increase the land tax for the last two years and are looking for any excuse to do this. But we have stopped them before and we are not afraid. We are already sharpening our knives,” he added.

The tax increase was last floated in late 2008, when a deputy from the ruling coalition proposed increasing the land tax by 179 percent to help fund government infrastructure agency Adif. Specifically, he wanted to increase the tax from €170 million in 2008 to €475 million in 2009. The land tax had increased by around 3 percent from 2007 to 2008.

Naturally, concessionaires vociferously opposed this proposal, threatening to take the government to court for violating the concession contracts it signed with them in 2005. Other threats included passing on the cost of the tax increase to users by raising tolls right in the middle of the financial crisis.

In the end, the government is likely to backtrack due to a veiled, but much more potent threat. “If the government were to increase this tax, it would do irreparable damage to its credibility with the industry,” the source said. With a multi-billion euro PPP pipeline still in procurement, this argument is at least as compelling today as it was in late 2008.