Tax Revenue in UK Plunges as Drivers Drive Less, and Slower


Image credit: Tim Hohm, used under Creative Commons license.

From the GM CEO's call to raise gas taxes to some brave souls willing to pay a voluntary gas tax, there are plenty of people who believe we should all be paying more to account for the true cost of gasoline. But for Governments who see this as a likely source of increased revenue, there is a downside—because if gas taxes do what they are supposed to, revenue can actually fall. The Guardian reports that this may be what's happened in the UK recently as drivers cut back dramatically on fuel use:

The government has lost almost £650m in tax revenue in the first 12 weeks of this year thanks to a drop in the amount of petrol and diesel being used by British motorists compared with the same period three years ago, according to the AA. [...]

Year-on-year figures over the first quarter show a 3.7% decline in petrol use and a 0.5% in diesel, backing evidence that motorists were cutting speeds to conserve fuel and reducing car use.

Of course UK drivers have been paying high fuel taxes for some time now, and the recent rise in prices, and drop in uses, has more to do with geo-political issues than the tax man. Nevertheless, many campaigners have raised their voices for a drop in taxes to help drivers feeling the pinch. But maybe there's a better way.

Surely the elegant answer would not be to spend fuel taxes on schools, hospitals or other essentials—but to channel that money into further projects supporting fuel efficiency, public transportation, telecommuting and other initiatives that help ease the pain for drivers at the pump. The tax would then work to reduce revenue further as the challenge gets met. A tax that works to eliminate our need to pay it—isn't that something we can all get behind?

More on Fuel Taxes and the True Cost of Gasoline
GM CEO Calls for $1 Rise in Gas Taxes
The True Cost of Gasoline (Video)
Would You Pay a Voluntary Gas Tax?

Tags: Economics | Fuel Efficiency | United Kingdom

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