• Fuel tax decline has cost 350,000 jobs

    On the day the European Commission is set to propose an increase in the minimum level of road diesel taxation in Europe (1), a new study shows that average road fuel taxes in Europe have declined by 10 cents per litre in real terms since 1999.  If taxes had been inflation-corrected and the revenues used to lower labour taxes, 350,000 jobs would have been saved, oil imports would have been cut by €11 billion, and road transport CO2 emissions would have been 6% lower, according to the report (2).

    [mailchimp_signup][/mailchimp_signup]The surprising conclusion of the research by sustainable transport campaign group Transport & Environment (T&E) is that the average fuel tax levied on
    road fuels in the ‘old’ EU15 is in real terms €0.10 per litre lower today than it was in 1999. Average fuel tax, in 2010 prices, went down from €0.59 a
    litre in 1999 to €0.49 a litre in 2010.  As consumption remained stable, the result was a 16% plunge in tax revenues from €180bn to €152bn, in today’s
    Jos Dings, director of T&E said: “As cash-strapped countries across Europe are struggling to balance the books, the last thing they should do is increase
    job-killing labour taxes.  This study shows that fuel tax increases could have saved thousands of jobs and cut emissions and oil imports at the same time.
     Drivers don’t like to see pump prices go up, but in tough economic times this is a much fairer option than increasing labour taxes for all which pushes
    people out of work.”    
    Of the 10-cent fall in the average per-litre tax on fuel, three cents was caused by the shift to diesel. In 1999 the share of diesel was a bit over 50%,
    today it’s two thirds.  The effect of the shift is lower overall tax revenue from road fuel and lower average fuel tax per litre.   
    More than six cents of the fall can be explained by inflation: most member states do not automatically adapt their fuel taxes to inflation, which has caused
    them to fall in real terms.
    Since oil prices more than trebled between 1999 and 2010, drivers pay roughly €100bn more in oil import bills than in 1999, but €32bn less in fuel tax.
     Taking a longer term view, pump prices in 2010 were still below the level of 1981 and 1982 (following the 1979 energy crisis) in real terms.
    The study also highlights one of the main reasons why EU minimum rates of fuel tax are important, because it protects against small, strategically placed
    countries from profiteering by setting taxes low and causing lorries to fill up in their country.  This reduces the freedom of neighbouring countries to
    set their own desired rate of fuel tax.
    Dings commented: “Luxembourgers earn €1,500 per head of population from trucks and cars coming in to fill up, at the expense of their neighbours.   EU
    minimum rates have helped lower the impact of this, but rates must be adjusted for inflation and reflect the big shift to diesel.  Fuel tax havens like
    Luxembourg are bad for Europe as a whole.”  
    T&E is calling for the minimum levels of taxation on road fuel to be higher for diesel than for petrol, to reflect the higher energy and CO2 content per
    litre of diesel fuel.  In addition, the organisation wants the EU to automatically correct minimum levels of taxation for inflation, abolish the current
    fuel tax ban for aviation, shipping and fisheries, and to tax biofuels on their energy content and overall climate impact.

    (1) The EU is expected to propose a revision to the most recent Energy Tax Directive, which came into force on 1 January 2004.  

    (2) ‘Fuelling Oil Demand: What happened to fuel taxation in Europe’:
    A 4-page briefing on the energy tax directive: