For you and I it means we have more money in our pockets to
spend as we see fit. Which ultimately creates
jobs in the productive private sector.
For the Government, it means less tax revenue. Or does it? Despite George Osborne’s best efforts, petrol
retailing remains a joint venture between the taxman and the private sector,
with the latter merely a minority shareholder. As a result, one ought to expect only a small
proportion of any fall in the price of oil to filter through to the cost of
petrol.
To illustrate what happens, let’s go back to when the price
of a litre of petrol was around £1.33 – in other words, before the prices fell.
At the time, duty accounted for 58p, VAT
for 22p, the companies that supplied the crude and refined it got 48p and the
distributors (the petrol stations and trucks) got just 5p. Since then, the price of petrol has dropped by
9p, almost all of which has been absorbed by the private sector and very little
(bar a dip in VAT) by the Treasury.
The Treasury is still collecting 58p from duty, its take
from VAT has dropped slightly to just under 21p, the oil companies get just
over 40p (which means that their revenues are down by around 17pc) and the
retailers still make as little as 5p. Needless
to say, none of these figures include the massive tax that the Government grabs
on oil companies’ profits.
So what does this mean? Well it means on current pump prices, tax accounts for
63.4pc of the money handed over by you at the petrol station. This is a ludicrously high percentage. Can you imagine that level of tax on any other product that you buy? Yet it is the politicians who are taking the
moral high ground, and pinning the blame for high prices on the private sector.
The stark reality is that even if there
were collusion of some sort – a point entirely unproved – the worst
case scenario probably would be that prices are 1p-2p too high some of the
time, a trivial problem compared with 79p “overpricing” caused by taxes.
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