  The outcome of upcoming cosmological surveys will depend on the accurate
estimates of photometric redshifts. In the framework of the implementation of
the photo-z algorithm for Euclid, we are exploring new avenues to improve
template-fitting methods. The paper focusses on the prescription of the
extinction of source light by dust in the Milky Way. Since Galactic extinction
strongly correlates with wavelength and photometry is commonly obtained in
broad-band filters, the amount of absorption depends on the source SED, a point
often neglected as the SED is not known a-priori. A consequence of this is that
the observed E(B-V) (=A_B-A_V) will be different from the E(B-V) used to
normalise the absorption law k_lambda (=A_lambda/E(B-V)). Band-pass corrections
are required to renormalise the law for a given SED. We assess the band-pass
corrections of a range of SEDs and find they vary by up to 20%. We investigate
how dust-to-reddening scaling factors depend of the sources used for their
calibration. We derive scaling factors from the color excesses of z<0.4 SDSS
red galaxies and show that band-pass corrections predict the observed
differences. Extinction is then estimated for a range of SEDs and filters
relevant to Euclid and other cosmological ground-based surveys. For high
extinction line-of-sights (E(B-V)>0.1, ~8% of the Euclid survey), the
variations in corrections can be ~0.1mag in the `bluer' optical filters and
~0.04mag in the NIR filters. An inaccurate correction of extinction critically
affects photo-z. In particular, for high extinctions and z<0.5, the bias (mean
D_z=z_phot-z_real) exceeds 0.2%(1+z), the precision required by weak-lensing
analyses. Additional uncertainty on the MW extinction law further reduces the
photo-z precision. We propose a new prescription of Galactic absorption for
template-fitting algorithms that takes into consideration the dependence of
extinction with SED.
