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The levying of tax on fuel proves to be a brake on consumption due to rising prices

Fuel taxation was the subject of intense debate last spring due to rising oil prices fueled by the war in Ukraine. There have been many proposals to reduce it, although some taxes, such as a special tax on hydrocarbons, depend not on price but on consumption. In the end, the idea of ​​subsidizing the liter by 20 cents won and the tax system was maintained. Now, the statistics of this tribute allow us to draw a picture of how fuel consumption has developed this year. Its collection is up almost 2% compared to pre-pandemic figures, while tax revenue is up 18%, driven by the effect of inflation.

There are two charges for refueling. VAT, which is based on the price, and a special tax on hydrocarbons, which applies exclusively to each liter consumed. Thus, the latter serves to monitor the consumption of gasoline and diesel in Spain. From January to July of this year, the state and communities collected 7,451 million euros. The level is significantly higher than the data for the same period in 2021 and 2020 due to mobility restrictions due to the pandemic. For this reason, it is necessary to restore the 2019 data in order to move to comparable data. 7.247 million was collected during that period from January to July.

The tax agency itself admits that the increase in the collection of this tax in the month of July was “low”. “The reason for this behavior is the impact that high prices are having on consumption, especially for automotive diesel,” the agency’s collection report after the first seven months of the year said. “The increasing evolution of prices has slowed down the progress of consumption,” the agency adds, indicating that sales have been hampered by rising costs.

The statistics actually show that although more is collected in 2021 than in 2019, consumption has decreased. Between January and July, 16,400 million liters of fuel were sold, compared to 17,000 million liters purchased in 2019. Why is the collection growing if less is being consumed? The tax agency gives the answer in its report: gasoline consumption is increasing, while automotive diesel “remains below pre-pandemic levels”. Tax on hydrocarbons is higher on petrol than on diesel.

Thus, the collection statistics collected by the tax agency serve as a context in which fuel consumption has slowed compared to the pre-pandemic period. Diesel or professional gas oil still shows a level that does not exceed the level of 2019, even though the economy and tourism recover throughout the year. Thus, the effect of each liter of fuel premium on consumption would be reduced.

A recent report by CaixaBank Research confirms this reality. “Not all consumers reacted the same way to the price increase,” said the document signed by Josep Mestres. Half of customers – using enterprise cards at stations – increased their fuel spending in July, 13% more than in 2019. study. Similarly, those who already spent less on fuel in 2019 reduced their spending in 2022. The reduction in consumption is greater than those who have increased fuel costs.

“The difference in behavior between consumption levels has been accentuated by price increases,” adds Mestres. “In other words, all consumers responded to price increases by adjusting consumption, but not all had the same ability to compensate for price increases,” he emphasizes. Thus, he notes, it is likely that those who have already spent more in 2019 have had less opportunity to reduce their spending because it is more substantial or more likely to anticipate price increases. “However, those who spent less on fuel were more likely to reduce their consumption, either by traveling less or by substituting their own car for public transport,” the document concludes.

Carbon tax collections will mark their highest level in 2022, although slightly above 2019, which was the highest bar to date. The liter consumption, however, has not yet fully recovered. In other words, since it is a tax that depends not on the price, but on the level of fuel sales, it does not generate special income for the state and communities by collecting taxes. It is not known, as the tax agency does not break down collection data to this level, how much has been increased by VAT, which is charged at each fuel fill-up. Anyway, Spain is one of the European countries with the lowest tax burden on fuel.

Although the special tax on hydrocarbons is not dependent on prices, the People’s Party included the tax among its tax cut targets last spring. During the intensive campaign to reduce fuel taxation, before the fuel premium was finally approved, the PP made various mistakes by not explaining how this tax actually works. The current president of the party, Alberto Núñez Feijo, has gone so far as to accuse the government of “cashing in” with rising prices, even though the tribute is 58% reserved for the autonomous communities.

This week, the PP again called for a reduction in this tax, despite the fact that its collection is not affected by the increase in the price of gasoline. This is a proposal included in a document sent to the government to negotiate measures to ease the crisis over energy prices. “The temporary reduction of the tax rates of the special tax on hydrocarbons should be carried out to the minimum provided for in the European directive,” said the document published by the PP this Monday.

Source: El Diario





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