Economics:Taxes on Fuel and Vehicles
Published: December 18, 2010, 12:00 am
Updated: May 7, 2012, 6:55 pm
This article has been reviewed by the following Topic Editor:
David Hassenzahl PhD
Taxes on fuels are an attractive source of revenue. They amass vast sums, amounting to $1.2 trillion in 2004, or 10.8% of all revenues collected by governments. They are easier to collect than other taxes because they are assessed at refineries or large wholesalers, which are few in number. People are somewhat less adverse to fuel taxes than other taxes because a major portion of these revenues is spent on highly visible infrastructure projects. Road signs in construction zones along U.S highways proudly announce “Your Tax Dollars at Work.” The public also recognizes that, in addition to high fuel prices, high fuel taxes discourage superfluous driving as well as encourage the purchase of more fuel-efficient and less polluting vehicles.
The average cost of extracting, transporting, and refining gasoline and diesel fuel in 2006 was $0.53 per liter ($2.01 per gal) for gas and $0.59 per liter ($2.23 per gal) for diesel. [1] Average prices at the pump, however, ranged from $0.02 to $1.90 per liter ($0.08 to $7.19 per gal) in different countries, depending on fuel subsidies or taxes. Countries subsidizing fuel are, in general, major oil exporters. Most other countries tax fuels, often at rates higher than other goods.
Taxes on fuels are only the beginning of revenue collection. Supplemental taxes on vehicles are nearly universal, although there is little uniformity among countries or sometimes even among regions within a single country. Most governments assess a value-added tax or sales tax at the time of purchase that is based on a percentage of the purchase price. Most also assess a license or registration fee at the time of purchase; this tax often varies with the value of the vehicle and some measure of its fuel consumption. Finally, most assess an annual circulation or road use fee; this tax is often keyed to some measure of its fuel efficiency.
This is an excerpt from the book Global Climate Change: Convergence of Disciplines by Dr. Arnold J. Bloom and taken from UCVerse of the University of California.
©2010 Sinauer Associates and UC Regents
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Citation
Arnold J Bloom (Lead Author);David Hassenzahl PhD (Topic Editor) "Taxes on Fuel and Vehicles". In: Encyclopedia of Earth. Eds. Cutler J. Cleveland (Washington, D.C.: Environmental Information Coalition, National Council for Science and the Environment). [First published in the Encyclopedia of Earth December 18, 2010; Last revised Date May 7, 2012; Retrieved May 21, 2013 <http://www.eoearth.org/article/Taxes_on_Fuel_and_Vehicles?topic=54270>
The Author
Arnold J. Bloom became a botanist through a circuitous route. Upon receiving an undergraduate degree in Physics from Yale University, he spent several years developing computer models of the spread of air pollution over cities in the USA and Germany. He received a Ph.D. in Biological Sciences from Stanford University, where he also completed a two-semester course in Environmental Legislation at the Law School. He conducted postdoctoral research on the temperature responses of plants at the ... (Full Bio)
Taxes on fuels are an attractive source of revenue. They amass vast sums, amounting to $1.2 trillion in 2004, or 10.8% of all revenues collected by governments. They are easier to collect than other taxes because they are assessed at refineries or large wholesalers, which are few in number. People are somewhat less adverse to fuel taxes than other taxes because a major portion of these revenues is spent on highly visible infrastructure projects. Road signs in construction zones along U.S highways proudly announce “Your Tax Dollars at Work.” The public also recognizes that, in addition to high fuel prices, high fuel taxes discourage superfluous driving as well as encourage the purchase of more fuel-efficient and less polluting vehicles.
The average cost of extracting, transporting, and refining gasoline and diesel fuel in 2006 was $0.53 per liter ($2.01 per gal) for gas and $0.59 per liter ($2.23 per gal) for diesel. [1] Average prices at the pump, however, ranged from $0.02 to $1.90 per liter ($0.08 to $7.19 per gal) in different countries, depending on fuel subsidies or taxes. Countries subsidizing fuel are, in general, major oil exporters. Most other countries tax fuels, often at rates higher than other goods.
Taxes on fuels are only the beginning of revenue collection. Supplemental taxes on vehicles are nearly universal, although there is little uniformity among countries or sometimes even among regions within a single country. Most governments assess a value-added tax or sales tax at the time of purchase that is based on a percentage of the purchase price. Most also assess a license or registration fee at the time of purchase; this tax often varies with the value of the vehicle and some measure of its fuel consumption. Finally, most assess an annual circulation or road use fee; this tax is often keyed to some measure of its fuel efficiency.
This is an excerpt from the book Global Climate Change: Convergence of Disciplines by Dr. Arnold J. Bloom and taken from UCVerse of the University of California.
©2010 Sinauer Associates and UC Regents
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1 Comment
Add CommentMitch McCann wrote:
Taxes on fuel might be part of an ecological policy aimed at reducing negative environmental impacts of excessive fuel use. One such impact, human activity related climate change, might be reduced by taxing fuels. Non tax policies, for example, the policy of requiring vehicle manufactures to increase the fuel efficiency of their offerings, may have undesirable effects without taxing fuels to mitigate the rebound effects. Rebound effects may include increased use of total fuel because of the proliferation and increasing employment of those technologies.