Fuel tax
From Wikipedia, the free encyclopedia
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 imposed on fuels which are intended for transportation. Fuels used to power agricultural vehicles, and/or home heating oil which is similar to diesel are taxed at a different, usually lower, rate.
In the United States, the fuel tax receipts are often dedicated or hypothecated to transportation projects 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, the demand may be more elastic, since people adjust their consumption of gas; that is, over a period of years, people will use less as the price increases (by switching to more fuel-efficient cars, public transit, consolidating trips, carpooling, or just traveling less). However, whether the demand for gas is high or not in the long run is an empirical question, and the price elasticity of demand may change over time, for example, as new technologies and products which are substitutes and/or compliments become available.
Many European countries such as the UK, France, and Italy use a 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.[citation needed]
[edit] Role in energy policy
Taxes on transportation fuels have been advocated as a way to reduce pollution and the possibility of global warming, conserve energy, and for certain countries reduce dependence on imported oil for foreign policy reasons. Placing higher taxes on fossil fuels makes alternative (and often less polluting) fuels such as natural gas, biodiesel or electric batteries more attractive, and put price pressure on manufacturers and consumers to choose more fuel-efficient products and processes.
Proponents advocate that automobiles should pay for the roads they use and argue that the user tax should not be applied to mass transit projects.
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.
One way to address this issue: a tax can be designed to give the revenue back to the consumer through tax rebates. Specifically, this could be done through transferring the money to the Social Security Trust Fund, then credited to current workers. This would reduce workers' payroll tax, which funds Social Security. [1]
[edit] Argument for raising the fuel tax in the U.S.
The United States is hugely dependent on fossil fuels. Fossil fuels help run our lives and we use them daily, particularly for transportation. In fact, one third of all energy use is dedicated to transportation. [2] To become a leader in renewable energy alternatives and in combating global warming, the United States needs to end its addiction to fossil fuels and to gasoline as its main fuel source.
To determine how to decrease the United States' dependence on fossil fuels, the Rand Institute conducted a study on whether it would be more beneficial for the U.S. to put a tax on fossil fuels or to give subsides for renewable energy. [3] Their research proved that taxing fossil fuels rather than subsidizing renewable energy sources provides Americans with the most incentives to switch to renewable energy sources. Since a tax on fossil fuels increases costs of usage, the currently more expensive renewable energy sources would finally be able to compete with fossil fuels. Moreover, a tax on fossil fuels would also lead to more conservation. Based on economic principles, when prices go up, people demand less. In 2008, when prices for gasoline went above $4 a gallon in the U.S., people strove to conserve and consumption decreased. [4] In other countries that have higher gasoline prices, the average person actually drives less. [5]
By lowering consumption of fossil fuels, a tax on fossil fuels would also help reduce CO2 emissions. Subsidies may make renewable energy sources more competitive with fossil fuels, but they do not encourage people to change their behavior. For example, if a subsidy were implemented for fuel-efficient cars, some people may choose to buy them, but the change would most likely cause people to drive more. When people use more efficient products, they justify using that product more. If instead a gasoline tax were implemented, people would strive to drive less and would also want more fuel efficient cars in attempt to reduce their gasoline usage. Thus less fossil fuels would be used, and new better technology would be demanded by consumers.
Other countries have demonstrated that a gas tax decreases consumption of fossil fuels. Unlike the United States, European countries have taxed gasoline heavily for many years. Gas taxes in Europe are about 2.3 times higher than in the United States and make up more than 70% of the cost of gasoline while gas taxes in the United States make up less than 20% of the cost of gasoline. [6] Some think the United States is behind the rest of the developed world in gas taxes and could still compete competitively even if the tax was raised.
In Europe, some of revenue from the gasoline taxes is used to fund public transportation and renewable energy projects. This is essential because in order to reduce dependence on fossil fuels, the average person simply needs to drive less. Although overall CO2 emissions are higher in cities because of factories and industries, emissions per a person are much lower than in suburban America where people do not use public transportation. By raising the fuel tax, Americans would be encouraged to think before driving and the United States could be closer to ending their addiction to fossil fuels and to becoming a world leader in renewable energy sources.
[edit] Tax rates
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Current international petrol pump prices can be seen in Fuel Price Report for May 2008.
[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] Russia
Tax on mineral resource extraction (2008-2009):
- Oil: varies 1000 RUR/t - 13800 RUR/t; middle MRET 3000 RUR/t (0.058 €/l = 0.284 $/gal).
- Natural gas: 147 RUR/1000m³ (4 €/1000m³).
- Petroleum gas: no
Excise tax on motor fuel 2008-2009:
- RON >80: 3629 RUR/t. (0.071 €/l = 0.343 $/US gal)
- RON <=80: 2657 RUR/t. (0.052 €/l = 0.251 $/US gal)
- Diesel: 1080 RUR/t. (0.025 €/l = 0.123 $/US gal)
Other fuel (like avia gasoline, jet fuel, heavy oils, natural gas and autogas) prices has no excise tax.
Value Added Tax — 18% on fuel and taxes.
Full tax rate is near 55% of motor fuel prices (ministry of industry and energy facts 2006).
[edit] Europe
[edit] France
Petroleum products destined for utilization by aircraft engaged in commercial flights outside of the customs territory of continental France are exempt from all customs duties and domestic taxes.[7]
[edit] Germany
Fuel taxes in Germany are €0.4704 per litre for ultra-low sulphur Diesel and €0.6545 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 €1.03 per litre for ultra-low sulphur Diesel and €1.22 per litre (approximately USD 6.28 per US gallon) for unleaded petrol (March 2009).
[edit] Netherlands
The sale of fuels in the Netherlands is levied with an excise tax. 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. In total, taxes account for 68,84% of the total price of petrol and 56,55% of the total price of diesel[8]. 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.
[edit] Norway
Even though Norway is the third largest oil exporter, the fuel is heavily taxed. The fuel tax for regular fuel pumps (gas stations) in Norway contributed to 63% of the fuel price in 2007 (The tax was USD 1.42 per litre 95 RON petrol). The government refers to the tax as environmental tax on fuels. The tax is subject to much controversy and debate in Norway, specially since Norway has a widespread population and lack of public transportation in rural areas. In 2008 the coalition government of Norway further increased the tax for petrol and diesel.
Public transportation is subject to the same taxes as private users. The steep increase in fuel prices worldwide in 2006-2008 combined with increased fuel taxes in the same period threatens public transportation in rural areas.
Jet fuel has minor taxes. Diesel for use by farmers is colored red and is not taxed.
[edit] United Kingdom
From 2007-10-01 the main road fuel (petrol and diesel) duty rate in the UK was GBP£0.5035 per litre (GBP£2.2890/imperial gal or GBP£1.9059/US gal). The rate for biodiesel and bioethanol was £0.3035/L (GBP£1.3797/imperial gal or GBP£1.1489/US gal).[9] Value Added Tax (VAT), 15% from 2008-12-01 to 2009-12-31, is also charged on the price of the fuel and on the duty. At a pump price of 90.0p/litre (typical for petrol in mid December 2008), this would put the combined tax at 62.09p/litre, or approximately USD$3.49 per US gallon. Thus without tax, the retail price would be 27.91p per litre, making a combined tax rate of 222%.
The latest increase - to GBP£0.5619 per litre on unleaded petrol - came into force on 2009-09-01 and is planned to increase "on 1 April from 2010 to 2013 by 1 ppl above indexation in each year." [10]
Diesel for use by farmers and construction vehicles is coloured red and has a much reduced tax.
Jet fuel used for international aviation attracts no duty, and no VAT.[11]
[edit] North America
[edit] Canada
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 (73.6 ¢/imperial gal; 61.2 ¢/US gal) in the Yukon to 30.5 ¢/L ($1.386/imperial gal; $1.153/US gal) 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.[12]
[edit] United States
Fuel taxes in the United States vary by state. For the first quarter of 2009, the mean state gasoline tax is 27.2 cents per US gallon, plus 18.4 cents per US gallon federal tax making the total 45.6 cents per US gallon (12.0 ¢/L). For diesel, the mean state tax is 26.6 cents per US gallon plus an additional 24.4 cents per US gallon federal tax making the total 50.8 cents US per gallon (13.4 ¢/L).[13]
| State | Gasoline Tax (figures include $0.184 federal fuel tax) |
Diesel Tax (figures include $0.244 federal fuel tax) |
|---|---|---|
| Alabama | $0.393 | $0.463 |
| Alaska | $0.184 | $0.244 |
| Arizona | $0.374 | $0.434 |
| Arkansas | $0.402 | $0.472 |
| California | $0.583 | $0.650 |
| Colorado | $0.404 | $0.449 |
| Connecticut | $0.548 | $0.678 |
| Delaware | $0.414 | $0.464 |
| District of Columbia | $0.384 | $0.444 |
| Florida | $0.529 | $0.542 |
| Georgia | $0.308 | $0.391 |
| Hawaii | $0.520 | $0.705 |
| Idaho | $0.434 | $0.494 |
| Illinois | $0.522 | $0.616 |
| Indiana | $0.481 | $0.634 |
| Iowa | $0.404 | $0.479 |
| Kansas | $0.434 | $0.514 |
| Kentucky | $0.409 | $0.439 |
| Louisiana | $0.384 | $0.444 |
| Maine | $0.483 | $0.555 |
| Maryland | $0.419 | $0.487 |
| Massachusetts | $0.419 | $0.479 |
| Michigan | $0.493 | $0.525 |
| Minnesota | $0.440 | $0.500 |
| Mississippi | $0.372 | $0.432 |
| Missouri | $0.357 | $0.417 |
| Montana | $0.462 | $0.530 |
| Nebraska | $0.457 | $0.517 |
| Nevada | $0.515 | $0.530 |
| New Hampshire | $0.380 | $0.440 |
| New Jersey | $0.329 | $0.419 |
| New Mexico | $0.372 | $0.472 |
| New York | $0.609 | $0.670 |
| North Carolina | $0.486 | $0.546 |
| North Dakota | $0.414 | $0.474 |
| Ohio | $0.464 | $0.524 |
| Oklahoma | $0.354 | $0.384 |
| Oregon | $0.434 | $0.487 |
| Pennsylvania | $0.507 | $0.636 |
| Rhode Island | $0.494 | $0.554 |
| South Carolina | $0.352 | $0.412 |
| South Dakota | $0.424 | $0.484 |
| Tennessee | $0.398 | $0.428 |
| Texas | $0.384 | $0.444 |
| Utah | $0.429 | $0.489 |
| Vermont | $0.384 | $0.504 |
| Virginia | $0.375 | $0.437 |
| Washington | $0.559 | $0.619 |
| West Virginia | $0.506 | $0.565 |
| Wisconsin | $0.513 | $0.573 |
| Wyoming | $0.324 | $0.384 |
[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 ($1.933/imperial gal; $1.607/US gal) on petrol. In addition the national compulsory Accident Compensation Corporation motor vehicle account receives a contribution of 7.33 cents per litre (33.3¢/imperial gal; 27.7¢/US gal) from petrol taxes. This is scheduled to increase in 2008 to 9.34 cents/litre (42.4¢/imperial gal; 35.4¢/US gal). 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 25 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.[15]
[edit] See also
- Carbon tax
- Fuel taxes and rising oil prices - how the taxes of various countries could be used to mitigate the rise in oil prices since 2003
[edit] References
- ^ A Tale of Two Taxes Robert Stavins, Harvard Kennedy School's Belfer Center
- ^ The Future Transportation with Sustainable Energy Gustav R. Grob, International Sustainable Energy Organization
- ^ Global Subsidies Initiative
- ^ Raise the Gas Tax Richard G. Lugar, Washington Post
- ^ Fuel Taxes Victoria Transport Policy Institute
- ^ Gas Prices in Europe James Martin
- ^ France Customs Code (Code de Duanes) Article 195
- ^ http://www.minfin.nl/Onderwerpen/Belastingen/Kostprijsverhogende_belastingen/Accijnzen_en_verbruiksbelastingen/Feiten_over_belasting_op_brandstof#internelink2
- ^ "Hydrocarbon Oils: Duty rates". UK HMRC. http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageExcise_RatesCodesTools&propertyType=document&id=HMCE_PROD1_027232.
- ^ "Hydrocarbon Oils: Duty rates". UK HMRC. http://www.hmrc.gov.uk/budget2009/bn66.pdf.
- ^ "Notice 179A Aviation Turbine Fuel (Avtur)". HM Revenue & Customs. December 2006. http://customs.hmrc.gov.uk/channelsPortalWebApp/downloadFile?contentID=HMCE_CL_000186.
- ^ "Oil and Gas Prices, Taxes and Consumers". Department of Finance (Canada). July 2006. pp. 6b) Application of the GST. http://www.fin.gc.ca/toce/2006/gas_tax-e.html. Retrieved on 2007-12-13.
- ^ Motor Fuel Taxes
- ^ http://www.api.org/statistics/fueltaxes/upload/State_MotorFuel_ExciseTax_Summary_4-2009.pdf
- ^ "Fuel excise duty revenue will all be used on land transport". Beehive (New Zealand). July 2007. http://www.beehive.govt.nz/release/fuel+excise+duty+revenue+will+all+be+used+land+transport. 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
