Tax revenues: what governments are hiding
If you think everyone is suffering from high oil prices, you are mistaken. Around the world, Governments are crying crocodile tears. They are blaming OPEC, oil companies, speculators and anyone else they can think of. But guess who's making the really big bucks - and how.
In January 2007, we were all getting hot under the collar about oil prices at USD50 a barrel. Although, in truth, that month marked something of a low spot for the last time it had cost so little was in mid 2005 and just six months earlier had reached almost USD80 per barrel.
But the inexorable climb of the oil price since then with increasingly sharp rises in the first half of this year, has taken prices up to and beyond USD140 per barrel.
Of course, someone, somewhere from the people that get the oil out of the ground to those who are selling contracts they bought in June 1998 for just USD12 per barrel is making a lot of money.
But what about governments.
Some, those who subsidise fuel prices for example, are being badly bitten by the rises. Several countries have had to remove road fuel subsidies, or make substantial cuts in them, just to keep their countries out of economic disaster. Had Malaysia, for example, not done so, a third of its national budget would be spent on keeping the pump price stable as wholesale prices rose.
But other governments regard road fuel and other oil products as a revenue generator.
In the UK, for example, all road fuel attracts a duty - that is a fixed rate tax.
From 1 October 2007, excise duty on main road fuels will increase by 2 pence per litre (ppl). These rates will be increased by a further 2 ppl on 1 April 2008 and 1.84 ppl on 1 April 2009.
|
Main road fuels |
Current effective rate per litre (£) |
Effective duty rate per litre (£)From 1 October 2007 |
Effective duty rate per litre (£)From 1 April 2008 |
Effective duty rate per litre (£)From 1 April 2009 |
|---|---|---|---|---|
|
Ultra low sulphur petrol (ULSP) |
0.4835 |
0.5035 |
0.5235 |
0.5419 |
|
Sulphur-free petrol (SFP) |
0.4835 |
0.5035 |
0.5235 |
0.5419 |
|
Ultra low sulphur diesel (ULSD) |
0.4835 |
0.5035 |
0.5235 |
0.5419 |
|
Sulphur-free diesel (SFD) |
0.4835 |
0.5035 |
0.5235 |
0.5419 |
(source: UK HM Revenue and Customs)
Note that that these figures are in pounds per litre.
And it's not just road fuels: those fuel surcharges on your air ticket?
From 1 October 2007 duty rates for unleaded petrol, for leaded petrol, for aviation gasoline and for other heavy oil used as road fuel will be increased by the same percentage as the main road fuels. Decisions on duty rates for these fuels in future years will be taken following consideration of the scope for simplifying the duty rate structure.
|
|
Current effective rate per litre (£) |
Effective duty rate per litre (£)From 1 October 2007 |
|---|---|---|
|
Unleaded petrol that is not ULSP or SFP |
0.5152 |
0.5365 |
|
Other light oil (including leaded petrol) |
0.5768 |
0.6007 |
|
Aviation gasoline (AVGAS) |
0.2884 |
0.3003 |
|
Heavy oil which is not ULSD or SFD (conventional diesel |
0.5468 |
0.5694 |
Source: HM Revenue and Customs.
These are flat rate taxes: they do not increase with price.
But Value Added Tax does: it is charged on the final pump price and, in the UK, it is charged at 17.5%.
Pump prices for petrol in the UK have now reached GBP120 . In 2005, they reached 90p per litre, and that caused outrage.
That demonstrates that someone, somewhere is actually absorbing some of the increase in oil costs before it reaches the pumps.
But that someone is not the government: in fact, it is benefiting from the continued increase in oil prices. Once before it levied a "windfall tax" on UK oil companies. But now it is the UK government, and others that apply an ad valorum tax to oil based products that are getting the windfall.
Source: The Chief Officers' Network at www.chiefofficers.net
The data shows crude oil prices. For illustration purposes, it shows what the tax-take would be on the raw materials if applied at that stage. The importance of this graphic is that it shows that the revenue available to governments is rising faster than the cost of fuel. The divergence shows that increases in fuel tax or duty rates are not motivated by keeping up existing revenues but are, rather, a penal measure.
Tables: http://www.hmrc.gov.uk/budget2007/bn53.htm
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