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The Great Fuel Duty Robbery

By Paul Michael
11th March, 2011

Most people know that fuel, just like alcohol and tobacco are taxed at source by the government. For fuel it is known as Fuel Duty. Most people know that Value Added Tax (VAT) is paid on most goods or services that we buy where the supplier is VAT Registered. In some cases the products we buy might be ‘Zero Rated’, like for much of our weekly groceries, but VAT creeps into much of what we buy. You can find out more about VAT from the HMRC website

What many people don’t realise is that successive governments first levy the Duty charge, and then levy the VAT. This means that VAT is being levied onto both the Duty and the base price of the item.

For fuel this means that to a litre of unleaded petrol priced at 51.22 pence – yes, you are reading this at March 2011 prices – a further 58.95 pence of Fuel Duty is added. Instead of applying VAT to just the petrol price, governments have applied VAT to the combined amounts. So, our litre of fuel is now priced at 132.2 pence on average, of which 61% is tax.

The robbery is that we have no goods or services to show for the element of VAT that is charged and paid by us for the Fuel Duty. The service station that actually passes on the VAT to the government hasn’t received goods or services for the Fuel Duty element either. We are paying tax for being taxed. It’s like the government charging some new tax for any income tax we pay on our earnings.

Type of Fuel	Total Price at Pump *	Fuel Duty **	VAT	Price at Pump less VAT	Price at Pump less VAT + Duty	Total Tax	% Tax
Unleaded	132.20	58.95	26.44	110.17	51.22	80.98	61%
Diesel	138.12	58.95	27.62	115.10	56.15	81.97	59%
LPG	76.65	32.71	15.33	63.88	31.17	45.49	59%

* Average Prices	http://www.petrolprices.com/
** Fuel Duty	http://www.whatgas.com/car-finance/fuel-duty.html

If fuel were taxed fairly, this is the breakdown of what we would pay…

Type of Fuel	Total Cost at Pump *	Fuel Duty **	VAT	Cost at Pump less VAT	Cost at Pum less VAT + Duty	Total Tax	% Tax
Unleaded	120.41	58.95	10.24	110.17	51.22	69.19	57%
Diesel	126.33	58.95	11.23	115.10	56.15	70.18	56%
LPG	70.11	32.71	6.23	63.88	31.17	38.94	56%