Fuel tax
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A fuel tax (also known as a petrol tax, gasoline tax, gas tax or fuel duty) is a sales tax imposed on the sale of fuel. In most countries the fuel tax is not imposed on fuel which is not intended for transportation: fuel used to power agricultural vehicles, and/or home heating oil which is similar to diesel. This creates an economic incentive for illegal use of fuel.[citation needed]
In the United States, the funds are often dedicated or hypothecated to transportation, or even roads, so that the fuel tax is considered by many a user fee. In other countries, the fuel tax is a source of general revenue.
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[edit] Effects
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Because of the relatively inelastic nature of demand for petrol, in the short run the tax will be an effective source of revenue. In the long run, however, theory predicts that people adjust their consumption of petrol; that is, over a period of years, people will consume less as the price increases (by switching to more fuel-efficient cars, mass transit, consolidating trips, carpooling, or just traveling less). Countries[which?] use a high fuel tax to decrease dependence on fossil fuels (that often have to be imported), reduce traffic and reduce pollution.[citation needed]
In some regions of the world, differences in fuel taxes between countries result in a significant level of cross-border purchasing of motor fuel. This is particularly true in Europe, where large differences in fuel taxes, coupled with minimal or no border controls, encourage drivers to cross borders for the sole purpose of filling up their tanks with fuel. Some states, such as Luxembourg, Andorra, Gibraltar, have strategically reduced fuel tax rates to attract more cross-border fill-ups, which ultimately increase tax revenue. Most countries' customs regulations permit the duty-free import of the contents of a vehicle's built-in fuel tank, but there are exceptions. Singaporean customs officials check the fuel gauges of vehicles leaving Singapore and require that the fuel tank be at least three quarters full, in order to limit the importation of lower-taxed fuel from Malaysia. Recently, gas stations in Argentina near the Brazilian border list two different prices for gasoline, one for cars with Argentinian license plates and another one for foreign plates, to restrict Brazilian drivers from buying cheaper fuel in Argentina, generating long lines at the gas stations and driving gas prices up.
[edit] Role in energy policy
Taxes on transportation fuels have been advocated as a way to reduce pollution and global warming, conserve energy, and for certain countries reduce dependence on imported oil for foreign policy reasons. Placing high taxes on fossil fuels makes alternative (and often less polluting) fuels such as biodiesel or electric batteries more attractive, and put price pressure on manufacturers and consumers to choose more fuel-efficient products and processes.
Critics argue transportation fuel taxes are a regressive tax, because low-income people pay a higher proportion with respect to their income, and transportation (to work, school, etc.) is not always an avoidable expense.
[edit] Tax rates
[edit] Asia
In the People's Republic of China, the fuel tax has been a very contentious issue. Efforts by the State Council to institute a fuel tax in order to finance the National Trunk Highway System have run into strong opposition from the National People's Congress, largely out of concern for its impact on farmers. This has been one of the uncommon instances in which the legislature has asserted its authority.
[edit] Europe
[edit] Germany
Fuel taxes in Germany are 47.04 Euro-Cents per litre for ultra-low sulphur Diesel and 65.45 Euro-Cents per litre for conventional unleaded petrol, plus Value Added Tax (19%) on the fuel itself and the Fuel Tax. That adds up to prices of 1.19 Euro per litre for ultra-low sulphur Diesel and 1.37 Euro per litre (approximately USD$7.615 per gallon) for unleaded petrol (Sep 2007).
[edit] Netherlands
The sale of fuels in the Netherlands is levied with an excise tax. A 1995 excise was raised by Dutch gulden 25 cents (€0.11), the Kok Quarter (€0.08 raise per litre gasoline and €0.03 raise per litre diesel), by then Prime-Minister Wim Kok is now specifically set aside by the second Balkenende cabinet for use in road creation and road and public transport maintenance. The 2007 fuel tax was € 0,684 per litre or $ 3,5 per gallon. On top of that is 19% VAT over the entire fuel price, making the Dutch taxes one of the highest in the world.
[edit] Norway
The fuel tax for regular fuel pumps (gas stations) in Norway contributed to 63% of the fuel price in 2007. The government refers to the tax as "environmental tax on fuels". The tax is subject to much controversy and debate in Norway.
Jet fuel has minor taxes. Diesel for farmers (colored red) is not taxed.
[edit] United Kingdom
From 2007-10-01 the main road fuel (petrol and diesel) duty rate in the UK is GBP£0.5035 per litre. The rate for biodiesel and bioethanol is £0.3035.[1] Value Added Tax (VAT), currently at 17.5%, is also charged on the price of the fuel and on the duty. At a pump price of 128.8p/litre (typical for diesel as at May 2008), this would put the combined tax at 69.53p/litre, or approximately USD$5.20 per US gallon. Thus without tax, the retail price would be 59.26p per litre, making a combined tax rate of 117%.
Jet fuel used for international aviation attracts no duty, and no VAT.
[edit] North America
Fuel taxes in Canada can vary greatly between locales. On average, about one-third of the total price of gas at the pump is tax. Excise taxes on gasoline and diesel are collected both federal and provincial governments, as well as by some select municipalities (Montreal, Vancouver, and Victoria); with combined excise taxes varying from 16.2 ¢/L in the Yukon to 30.5 ¢/L in Vancouver. As well, the federal government and some provincial governments (Newfoundland and Labrador, Nova Scotia, and Quebec) collect sales tax (GST and PST) on top of the retail price and the excise taxes.[2]
Fuel taxes in the United States vary by state. For the first quarter of 2008, the average state gasoline tax is 28.6 cents per gallon, plus 18.4 cents per gallon federal tax making the total 47 cents per gallon (12.4 cents/L). For diesel, the average state tax is 29.2 cents per gallon plus an additional 24.4 cents per gallon federal tax making the total 53.6 cents per gallon (14.2 cents/L).[3]
[edit] Oceania
The fuel tax system in Australia is very similar to Canada in terms of its double-dipping tax rates, but varies in the case of exemptions including tax credits and certain excise free fuel sources. Fuel taxes are handled by both the Federal and State Governments, including both an Excise Tax and a Goods and Services Tax or "GST". The tax collected is generally used to help fund national road infrastructure projects and repair roads, as well as provide extra revenue for other services.
Fuel taxes in New Zealand are considered an excise applied by the New Zealand Customs Service on shipments brought into the country. A breakdown of the fuel taxes are, however, published by the Ministry of Economic Development. Excise as at 1 July 2007 totals 42.524 cents per litre on petrol. In addition the national compulsory Accident Compensation Corporation motor vehicle account receives a contribution of 7.33 cents per litre from petrol taxes. This is scheduled to increase in 2008to 9.34 cents/litre. The ethanol component of bio blended petrol currently attracts no excise duty. This will be reviewed in 2012. Diesel is not taxed at pump, but road users with vehicles over 1 tonnes in Gross Laden Weight and any vehicles not powered wholly by any combination of petrol, LPG or CNG must pay the Road User Charge instead. This incorporates an ACC component. The Goods and Services Tax (12.5%) is then applied to the combined total of the value of the commodity and the various taxes. In practice this means that 6 cents of the final pump price to consumers is a GST impost on the excise tax and ACC levy. On 25th July 2007 the Minister of Transport Annette King announced that from 1 July 2008 all fuel excise collected would be hypothecated to the National Land Transport Programme.[4]
[edit] See also
[edit] References
- ^ Hydrocarbon Oils: Duty rates. UK HMRC.
- ^ "Oil and Gas Prices, Taxes and Consumers", Department of Finance (Canada), July 2006, pp. 6b) Application of the GST. Retrieved on 2007-12-13.
- ^ Motor Fuel Taxes
- ^ "Fuel excise duty revenue will all be used on land transport", Beehive (New Zealand), July 2007. Retrieved on 2008-01-17.
[edit] External links
- International Fuel Prices 2007 with diesel and gasoline prices of 172 countries and information on fuel taxation for state financing
