Tuesday, September 13

Tax on Tax at the pumps


Letter published today in 'The Northern Echo'

Sir,

The vehicle fuel issue is back with us again, the cost of vehicle fuel now at new high levels a litre of fuel has now passed the £1.00 mark and the average is about 98p (an amazing £4.46 per gallon).

The taxation on diesel and petrol is 76% of the retail price. VAT is levied on the basic petrol price as well as on the duty, this is a tax on a tax.

The reality of the three components (product, customs duty and VAT) of the price of fuel at the pumps there are complex restrictions on effecting price reductions. Petrol manufacturers are under cost pressure because of the price of crude oil and refinery costs. Additionally, the duty payment of approximately 2.80 per gallon can not be reduced by the Chancellor without infringing an EU finance ministers agreement of May 2000 (following a French farmers revolt). Furthermore neither can the amount of VAT charged be reduced without EU permission.

VAT should only be charged on the actual cost of the fuel not the cost of fuel plus the customs duty.

This change would reduce the cost of fuel at the pumps by about 10 -12 pence per litre (46-48 pence per gallon).

The subsequent loss of revenue to HM Treasury could be re-claimed with an uplift on tax on chewing gum and cigarettes or any other anti-social curses of the modern world.

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