Fuel Tax, would lowering it actually raise more revenue ?
Discussion
Now I am not a massive campaigner for lower fuel prices as I dont use much but can understand what an issue it is for some, I get the impression that revenue is actually going down for fuel duty as people drive less to conserve this expensive commodity.
To my simple brain this means its kind of hit a ceiling and is now causing people to cut back with the associated knock on in the tax take, also people are staying at home and when they are at home they arent out spending (internet sales accepted) but there are lots of attractions, services and recreational stuff people must be not doing as they need the fuel to get to work.
So, seeing as the price has reached this critical mass where people think about it would dropping it mean that though the tax take is lower per litre that people would use more and be tempted back into driving more with the associated spending at their destination as they feel more flush, thus stumulating a moribund economy, ok the greens wouldnt like it and traffic volumes would suffer but I supect it may be what the country needs right now and perhaps lower inflation slightly, I reckon if it dropped so it was in one twenties again that may be enough.
To my simple brain this means its kind of hit a ceiling and is now causing people to cut back with the associated knock on in the tax take, also people are staying at home and when they are at home they arent out spending (internet sales accepted) but there are lots of attractions, services and recreational stuff people must be not doing as they need the fuel to get to work.
So, seeing as the price has reached this critical mass where people think about it would dropping it mean that though the tax take is lower per litre that people would use more and be tempted back into driving more with the associated spending at their destination as they feel more flush, thus stumulating a moribund economy, ok the greens wouldnt like it and traffic volumes would suffer but I supect it may be what the country needs right now and perhaps lower inflation slightly, I reckon if it dropped so it was in one twenties again that may be enough.
ds OUT of their cars - to get people buying cars which are less polluting/wasteful etc. - why would they want to change that now!?I agree, but the lazy ones will still use them whatever to do a mile to work and back, I am thinking more about people who are now not going out, spending and using their cars because they cant afford to because they need the fuel to get to work, my question was around would it actually bolster the economy if you took 10p off the cost of a litre by the same ammount or more than the loss in fuel revenue ?
Cars arent generally the cause of most of the damage to roads, its the HGV's that wreck road surfaces.
The Government really I dont think care about the green stuff, the pricing out of cars is generally a revenue thing, when everyone has a Polo Bluemotion they will ramp the VED back up.
Cars arent generally the cause of most of the damage to roads, its the HGV's that wreck road surfaces.
The Government really I dont think care about the green stuff, the pricing out of cars is generally a revenue thing, when everyone has a Polo Bluemotion they will ramp the VED back up.
Edited by J4CKO on Tuesday 16th August 16:55
J4CKO said:
I get the impression that revenue is actually going down for fuel duty as people drive less to conserve this expensive commodity.
Do you have any evidence to support your claim that the total tax take from petrol is falling as the duty increases?Petrol is a distress purchase - we buy it because we need it not because we fancy it for a treat.
However, to put some numbers to your arguement:
If the current fuel price is 134.9p/l and you want it to drop to 129.9p/l then the Government would los 6.22% of the total tax on petrol. In order to offset this loss of revenue all drivers would need to increase the amount of miles they drive by 6.63%. For example, a 12k mile a year motorist would now have to drive 12,795 miles.
If the current fuel price is 134.9p/l and you want it to drop to 120.0p/l then the Government would lose 18.52% of the total tax on petrol. In order to offset this loss of revenue all drivers would need to increase the amount of miles they drive by 22.74%. For example, a 12k mile a year motorist would now have to drive 14,728 miles.
What you're suggesting is that people aren't going out shopping/to attractions etc. because they can't afford the fuel?
I don't buy that for a second - fuel cost is trivial compared with what people spend when shopping/on family days out etc. etc.
I don't believe anyone who is avoiding using their car due to 'fuel cost' has any money to spend anyway...
I don't buy that for a second - fuel cost is trivial compared with what people spend when shopping/on family days out etc. etc.
I don't believe anyone who is avoiding using their car due to 'fuel cost' has any money to spend anyway...
J4CKO said:
I agree, but the lazy ones will still use them whatever to do a mile to work and back,
Yep because I've never bought a car to leave it sitting on the drive or in the garage doing so all while I walk anywhere - and never have any intention of doing that either.
J4CKO said:
I am thinking more about people who are now not going out, spending and using their cars because they cant afford to because they need the fuel to get to work, my question was around would it actually bolster the economy if you took 10p off the cost of a litre by the same ammount or more than the loss in fuel revenue ?
I don't think people are doing that - my monthly spend on fuel hasn't realy changed - what I have done is reduced some of the usage at the weekends to balance the books so to speakJ4CKO said:
The Government really I dont think care about the green stuff, the pricing out of cars is generally a revenue thing, when everyone has a Polo Bluemotion they will ramp the VED back up.
Another reason why I wouldn't go down the car change for VED saving route or even an expensive LPG conversion on the V8Both have the same potential to increase negating the cost of change to or conversion to LPG
No, it almost certainly wouldn't.
If you look at a graph of how fuel usage has dropped as prices have risen, and plot the price in Stirling of crude oil on the same graph, you can see that there is no point at which more money would be taken in tax below the current level.
ETA: The big question, I suppose, is whether lowering it would have enough of a boost on spending that the pick-up in VAT would cover the short-fall. I suspect the answer is still a resounding "no", though.
If you look at a graph of how fuel usage has dropped as prices have risen, and plot the price in Stirling of crude oil on the same graph, you can see that there is no point at which more money would be taken in tax below the current level.
ETA: The big question, I suppose, is whether lowering it would have enough of a boost on spending that the pick-up in VAT would cover the short-fall. I suspect the answer is still a resounding "no", though.
Edited by kambites on Tuesday 16th August 17:14
ralphrj said:
J4CKO said:
I get the impression that revenue is actually going down for fuel duty as people drive less to conserve this expensive commodity.
Do you have any evidence to support your claim that the total tax take from petrol is falling as the duty increases?Petrol is a distress purchase - we buy it because we need it not because we fancy it for a treat.
However, to put some numbers to your arguement:
If the current fuel price is 134.9p/l and you want it to drop to 129.9p/l then the Government would los 6.22% of the total tax on petrol. In order to offset this loss of revenue all drivers would need to increase the amount of miles they drive by 6.63%. For example, a 12k mile a year motorist would now have to drive 12,795 miles.
If the current fuel price is 134.9p/l and you want it to drop to 120.0p/l then the Government would lose 18.52% of the total tax on petrol. In order to offset this loss of revenue all drivers would need to increase the amount of miles they drive by 22.74%. For example, a 12k mile a year motorist would now have to drive 14,728 miles.
http://www.dailymail.co.uk/news/article-2012480/Fu...
You are missing part of my point, the treasury are already losing money, people are definitely cutting down on uneccessary journies, ok it is as you say a distress purchse and not optional but most people do associate the painful process of handing over £80 to fill a modest car with how far they travel in it and therefore perhaps think more of how they use it, with all the other demands on peoples incomes it isnt surprising.
Revenues for attractions are down, and really the few pence if it did come down would not make all the difference in reality but its a feelgood factor that may stimulate spending, I am not entirely convinced myself in terms of the maths of it but I am pretty sure they are losing money as it has gone up so much and that the economy needs a boost to drop inflation, would be a massive leap of faith for any Chancellor though.
B'stard Child said:
J4CKO said:
I agree, but the lazy ones will still use them whatever to do a mile to work and back,
Yep because I've never bought a car to leave it sitting on the drive or in the garage doing so all while I walk anywhere - and never have any intention of doing that either.
I just pick the right tool for the job, I dont tend to use the car for short journies if I can help it as that doesnt do it any good and sometimes its more trouble than its worth, I enjoy walking and cycling, I cycle to work mainly as I wouldnt get any exercise otherwise, the car can sit there all day as it doesnt put weight on.
J4CKO said:
I am thinking more about people who are now not going out, spending and using their cars because they cant afford to because they need the fuel to get to work, my question was around would it actually bolster the economy if you took 10p off the cost of a litre by the same ammount or more than the loss in fuel revenue ?
I don't think people are doing that - my monthly spend on fuel hasn't realy changed - what I have done is reduced some of the usage at the weekends to balance the books so to speakYou have just kind of contradicted yourself and confirmed you are using it less, other people are doing the same to a greater or lesser extent.
J4CKO said:
The Government really I dont think care about the green stuff, the pricing out of cars is generally a revenue thing, when everyone has a Polo Bluemotion they will ramp the VED back up.
Another reason why I wouldn't go down the car change for VED saving route or even an expensive LPG conversion on the V8Both have the same potential to increase negating the cost of change to or conversion to LPG
I think the concept that you have in mind here is known as the Laffer curve and relates to economic theory on the relationship between rates of income tax and total tax take. Not sure whether the theory can be applied to fuel duty as the factors involved are quite different.
http://en.wikipedia.org/wiki/Laffer_curve
http://en.wikipedia.org/wiki/Laffer_curve
I think the OP may have a point. We do know that the sale of fuel by the litre in the UK has decreased over the last five years, yet the price continues to go up, so the argument of 'use less, lower demand, lower price' doesnt wash because our Government rely heavily on the income from fuel duty to subsidise other unprofitable useless ventures. The Government raises more from Fuel Duty than from Council Tax, so its a vital income stream to the Treasury which relies on people using their cars.
The VAT rise added about 3p onto a litre of fuel, to make up for what the Treasury had 'lost' through decreased sales in the last few years. Of course one part of decreased sales is more fuel efficient cars, more careful driving etc and thats all great but not if buying an efficient car will only encourage the Govt to rack up the tax even more to make back their 'loss'.
They tell us to use our cars less to save money on fuel, but that doesnt work because lower takeup leads to higher tax and prices to make back the 'loss' from lack of takeup. Its an oxymoron of a policy. I believe a low tax economy works best as it gives more options, a high tax economy just locks people in one place and snowballs on both the public and the Government. Someone above said more cars = more road maintenance. Well car ownership went from 25 million to 32 million in 15 years yet investment in road improvements and maintenance hasnt kept pace anyway, and theres a flawed logic to the idea of 'lower fuel price means more cars on the road!' because in the last 15 years both car ownership and fuel prices have risen at a very fast rate. Im not saying lower fuel prices will mean less cars but its very misguided to view it in such a simple way.
The Govt are in a rock and hard place with VED, currently raising over £6billion, but if we all bought a Band A car, where will that £6billion come from? Probably added onto Fuel Duty, so then we'd all buy a Bluemotion and use less, so then they'll rack it up even more or charge £5000 for a driving licence renewal. Theres a conflict of interest between encouraging people to use unsustainable public transport and of losing treasury revenue. The idea of lower taxes means more revenue means lower taxes free up opportunities for people to start business, expand business, employ more people, travel further, creating jobs and income tax from that etc etc which would result in both healthy Treasury figures and higher employment.
The VAT rise added about 3p onto a litre of fuel, to make up for what the Treasury had 'lost' through decreased sales in the last few years. Of course one part of decreased sales is more fuel efficient cars, more careful driving etc and thats all great but not if buying an efficient car will only encourage the Govt to rack up the tax even more to make back their 'loss'.
They tell us to use our cars less to save money on fuel, but that doesnt work because lower takeup leads to higher tax and prices to make back the 'loss' from lack of takeup. Its an oxymoron of a policy. I believe a low tax economy works best as it gives more options, a high tax economy just locks people in one place and snowballs on both the public and the Government. Someone above said more cars = more road maintenance. Well car ownership went from 25 million to 32 million in 15 years yet investment in road improvements and maintenance hasnt kept pace anyway, and theres a flawed logic to the idea of 'lower fuel price means more cars on the road!' because in the last 15 years both car ownership and fuel prices have risen at a very fast rate. Im not saying lower fuel prices will mean less cars but its very misguided to view it in such a simple way.
The Govt are in a rock and hard place with VED, currently raising over £6billion, but if we all bought a Band A car, where will that £6billion come from? Probably added onto Fuel Duty, so then we'd all buy a Bluemotion and use less, so then they'll rack it up even more or charge £5000 for a driving licence renewal. Theres a conflict of interest between encouraging people to use unsustainable public transport and of losing treasury revenue. The idea of lower taxes means more revenue means lower taxes free up opportunities for people to start business, expand business, employ more people, travel further, creating jobs and income tax from that etc etc which would result in both healthy Treasury figures and higher employment.
martin84 said:
The Govt are in a rock and hard place with VED, currently raising over £6billion, but if we all bought a Band A car, where will that £6billion come from? Probably added onto Fuel Duty, so then we'd all buy a Bluemotion and use less, so then they'll rack it up even more or charge £5000 for a driving licence renewal. Theres a conflict of interest between encouraging people to use unsustainable public transport and of losing treasury revenue. The idea of lower taxes means more revenue means lower taxes free up opportunities for people to start business, expand business, employ more people, travel further, creating jobs and income tax from that etc etc which would result in both healthy Treasury figures and higher employment.
There's a plan for that.Starts with ROAD
Ends with PRICING.
J4CKO said:
Apologies for it beign the Daily Fail but I cant remember where I heard it.
http://www.dailymail.co.uk/news/article-2012480/Fu...
You are missing part of my point, the treasury are already losing money, people are definitely cutting down on uneccessary journies, ok it is as you say a distress purchse and not optional but most people do associate the painful process of handing over £80 to fill a modest car with how far they travel in it and therefore perhaps think more of how they use it, with all the other demands on peoples incomes it isnt surprising.
Again you are not showing that the Government are actually losing money.http://www.dailymail.co.uk/news/article-2012480/Fu...
You are missing part of my point, the treasury are already losing money, people are definitely cutting down on uneccessary journies, ok it is as you say a distress purchse and not optional but most people do associate the painful process of handing over £80 to fill a modest car with how far they travel in it and therefore perhaps think more of how they use it, with all the other demands on peoples incomes it isnt surprising.
That article says that less fuel was sold in Q1 2008 than in Q1 2011. You have assumed that the drop is due to the amount of tax the Government collects when a far more obvious cause of the drop would be the recession. If the drop was due to increased duty and VAT it would have been more appropriate to have compared Q1 2010 to Q1 2011. It is very telling to me that the article does not.
However, even if you take the figures given in that article, work backwards to a total fuel usage, use the old VAT rate and old fuel duty rate and compare it to today's lower fuel sales at higher tax rates you would see that the Government are taking almost exactly the same amount in tax now as they were then.
roachcoach said:
There's a plan for that.
Starts with ROAD
Ends with PRICING.
Disagree. Road pricing is an awful idea, an invasion of liberties, ludicrously horrifically expensive to impliment to start off with that it'd have to be twice the price motoring is now to even net the Treasury the same amount they get now and under Labour's plans bigger roads like bypasses and motorways would be more expensive to use than town roads, pushing all the traffic into the towns that the motorway was built to avoid in the first place. Nobody will ever sell the idea of road pricing to me.Starts with ROAD
Ends with PRICING.
It must be pointed out the Govt are only between the rock and hard place since they decided to do seperate bands based on co2 emissions. Theres obvious flaws in that, people have pointed out a Band M car doing 5000 a year will pollute less than a Band E car doing 15k etc but i personally believe in that there has to be an element of 'beating' the system to maintain respect for it. There has to be winners and losers, rather than just all losers. If the VED was just a flat rate which you had to pay to use your car on the road they could probably make the same amount of money with no arguments, a case of 'this is the price, take it or leave it' the task of encouraging lower pollution vehicles will be taken care of by fuel prices anyway.
Currently the Government raises around £6billion a year from VED, with around 32 million motorists (estimated) so if they all paid a flat rate of £190 they'd make the same amount. So make it £200 for a tax disc regardless of car (keep different rates for HGV's etc) and keep it simple. Simplicity is the best policy in my view.
Currently the Government raises around £6billion a year from VED, with around 32 million motorists (estimated) so if they all paid a flat rate of £190 they'd make the same amount. So make it £200 for a tax disc regardless of car (keep different rates for HGV's etc) and keep it simple. Simplicity is the best policy in my view.
You are saying that...
Less tax -> cheaper fuel -> more demand -> just as much revenue + happier people.
I'm not sure I agree with that, but I see what you are saying. Wouldn't more demand lead to higher prices though, at least partly off setting what you are trying to achieve? Except the money goes to OPEC instead of the goberment?
Less tax -> cheaper fuel -> more demand -> just as much revenue + happier people.
I'm not sure I agree with that, but I see what you are saying. Wouldn't more demand lead to higher prices though, at least partly off setting what you are trying to achieve? Except the money goes to OPEC instead of the goberment?
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