22 March 2006

Diesel tax evasion in the UK

The UK has the highest rate of diesel tax in Europe, ostensibly to help pay for roads, but in reality most of the revenue goes to government for general spending. One thing New Zealand truck, bus and diesel car owners should be grateful for is road user charges. All revenue from road user charges is dedicated by law to the National Land Transport Fund. Most of that revenue goes on roads, with the remainder going to help subsidise public transport, pay for Police enforcement of traffic laws and those road safety ads you see. Because road user charges vary according to vehicle weight and configuration, and are charged by distance, they are an effective form of user pays that means trucks pay their way in terms of wear and tear on state highways (and half in terms of local roads, as councils pay the rest from rates). You can argue about what the money is spent on, but the money is dedicated to transport (unlike all of the petrol tax).
However in Europe, the vastly differing levels of diesel tax means there is a black market in smuggling diesel across borders. Trucks with extra large fuel tanks enter the UK and siphon diesel to buyers at vastly reduced cost. In addition, other trucks legally enter the UK and drive on British roads without paying any British tax, effectively using them for free, competing unfairly with British truck operators.
The UK tax is 47p per litre, that's NZ$1.32 a litre of tax alone!! That is 70% of the cost of the fuel. The EU average is 22p per litre (around NZ$0.62). There are different rates for industrial and residential use compared to road use. Smugglers are selling diesel to British truck operators at around 50p a litre compared to up to 1.04p a litre at the pump.
The solution? Well the Blair government had one - it was going to replace much of the diesel tax (the EU has legal MINIMUM levels of fuel tax that Britain couldn't go below) with a road user charge system for trucks. The trucks would pay by distance and weight, as they do in New Zealand and, in exchange, get fuel tax and licence fee (road tax) refunds. It got held up in bureaucratic red tape, and another move to harmonise fuel tax in the EU at one, lower level was opposed by the House of Lords because it would cost £2 billion in revenue and it thought it wouldn't be good for the environment.
What rot. The diesel tax smugglers are legitimately bypassing a punitive tax which is stealing from the British road transport industry to fund anything BUT roads in Britain. The UK road transport industry supports tolls because it would mean foreign truck operators would pay the same as they do - but Gordon Brown and Tony Blair are into tax and spend, and the British public likes paying for an unproductive bureaucracy.


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