Fuel tax

A fuel tax (also known as a petrol, gasoline or gas tax, or as a fuel duty) is an excise 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.

Effects

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, cycling, walking, consolidating trips, carpooling, or 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.

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.

Role in energy policy

Taxes on transportation fuels have been advocated as a way to reduce pollution and the possibility of global warming and conserve energy. Placing higher taxes on fossil fuels makes petrol just as expensive as other fuels such as natural gas, biodiesel or electric batteries, at a huge cost to the consumer in the form of inflation as transportation costs rise to transport goods all over the country.

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.

Tax rates

International pump prices for diesel and gasoline for November 2010 are available at http://www.gtz.de/en/themen/29957.htm. Price history from surveys taken in November of even number years are also available. Price differences mostly reflect differences in tax policy.

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.

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).

Europe

France

Petroleum products destined for utilisation by aircraft engaged in commercial flights outside of the customs territory of continental France are exempt from all customs duties and domestic taxes.

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).

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. 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.

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.

United Kingdom

Main article: Hydrocarbon oil duty

From 4th January 2011 the UK duty rate for the road fuels unleaded petrol, diesel, biodiesel and bioethanol is £0.5895 per litre (£2.65 per imperial gallon or £2.20 per U.S. gallon). Value Added Tax at 20% is also charged on the price of the fuel and on the duty.

Using the UK average untaxed pump price for unleaded petrol of £0.4572 per litre (from the December 2010 average taxed price of £1.221 per litre, the duty rate of £0.5819 per litre and the then VAT rate of 17.5%) this would give a January 2011 taxed price of £1.256 per litre (£5.71 per imperial gallon or £4.75 per U.S. gallon) - that is equivalent to a tax rate of 175%.

Diesel for use by farmers and construction vehicles is coloured red (Red Diesel) and has a much reduced tax, currently £0.1133 per litre.

Jet fuel used for international aviation attracts no duty, and no VAT.

North America

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.

United States

File:US Diesel Taxes April 2009.svg

State Diesel Taxes, April 2009

Fuel taxes in the United States vary by state. The United States federal excise tax on gasoline, as of February 2011, is 18.4 cents per gallon and 24.4 cents per gallon for diesel fuel. In January 2011, motor gasoline taxes averaged 48.1 cents per gallon and diesel fuel taxes averaged 53.1 cents per gallon. 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). There are also a few states that charge sales tax on top of the excise taxes and the retail price. The states that have a tax on their fuel, impose a tax on commercial drivers that travel through their state, even if the fuel is not purchased in that state. The paper work for this taxed on a quarterly basis and filed somewhat like a federal tax return that is done yearly. Most commercial truck drivers have an agent fill out the paper work. The driver calls in their information, the agent figures out how much tax should be paid to each state, then the agent faxes the forms to the driver and they are required to carry the papers with them along with their travel log books.

Oceania

Australia

The fuel tax system in Australia is very similar to Canada in terms of featuring both a fixed and a variable tax, 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 partly used to help fund national road infrastructure projects and repair roads, however most of it goes into general revenue.

The current fuel tax in Australia is A$0.38143 per litre for petrol and ultra-low sulphur diesel (conventional diesel being taxed at A$0.40143 per litre). An excise for LPG of $0.025 per litre will be introduced from 2011, increasing to $0.125 per litre by 2015.

New Zealand

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 October 2010 totals 48.524 cents per litre ($2.206/imperial gal; $1.837/US gal) on petrol. In addition the national compulsory Accident Compensation Corporation motor vehicle account receives a contribution of 9.34 cents/litre (42.5¢/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 tonne 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 (15%) 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.

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
• Excise tax
• Vehicle miles traveled tax

External links

• International Fuel Prices 2009 with diesel and gasoline prices of 172 countries and information on fuel taxation for state financing
• 2011 NACS Annual Fuels Report