With 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 98pence (an amazing £4.46 per gallon).
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The Fuel Lobby protestors have presented an ultimatum to repeat their blockade of oil refineries as petrol prices continue to hit motorists and businesses, particularly small ones.
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The Fuel Lobby campaign group urged Prime Minister Tony Blair and Chancellor Gordon Brown to reduce the impact on hauliers and all road users by reducing the price of fuel by 10pence a litre.
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The taxation on diesel and petrol is 75% 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.
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The reality of the three components (products, customs duty and VAT) of the price of fuel at the pumps is that 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 (EUfin) of May 2000 (following a French farmers revolt). Furthermore, neither can the amount of VAT charged (1.75 per cent) be reduced without EU permission which certainly would not be forthcoming.
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There is a solution, VAT should only be charged on the actual cost of fuel not the cost of fuel plus the customs duty.
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This change would reduce the cost of fuel at the pumps by about 10-12 pence per litre (46-48 pence per gallon). The alteration would be within the Government's gift (IE would not break any agreements or treaties within the EU).
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The subsequent loss of revenue to HM Treasury could be reclaimed with an uplift of tax on chewing gum and cigarettes or any other anti-social curses of the modern world.
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Simple really, what's all the fuss about?
Sub-editor Sarah-Jane Hollands,
experiences bank breaking petrol prices
in South East London.
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