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What is the Highest Fuel Duty aka Fuel Tax in Europe?

Updated on February 27, 2013

Fuel duty is normally defined as the excise tax imposed by the Government to earn revenues for the annual budgetary expenses at the country level. While some countries may call it a fuel tax, most European countries would be happy to address it as a fuel duty.

It is a well known fact that a hike in fuel duty has an adverse impact on the fleet operations of a company, besides having a cascading effect on the economy as a whole. Whether the company in question is making use of one of the fuel card options offered by different oil companies becomes immaterial, because the higher fuel duty leads to a higher fuel rate on these fuel cards as well.

While taking note of the fuel duties that are prevalent across Europe, we came across some very interesting points. Netherlands appears to be the country where in the highest fuel duty is in force. A litre of petrol in Netherlands costs € 1.776. The price goes down by 10 cents a litre if you were to use a self-service petrol station. Nearly 57% of the cost of petrol goes towards taxes in Netherlands, thus making it one of the few countries with the highest fuel duties in Europe. Over and above the fuel excise duty, there is also the case of a 19% VAT or Sales tax. Together with the excise tax and the VAT, a litre of petrol contributes more than € 1 to the Dutch Exchequer.

The situation in the neighbouring Germany is very similar. Germany accounts for one of the highest fuel excise duty on diesel and petrol in Europe. Diesel is taxed 45 cents a litre and petrol is taxed at 65 cents a litre, thus making the fuel pricing in Germany in line with what is seen in the UK and the Netherlands. Over and above this fuel levy, the German Government levies a 19% sales tax or VAT. This makes the diesel price in Germany to be €1.42, and the petrol price is a tad higher, at €1.65 per litre.

Following on from Germany, let us consider the prevailing fuel duty in the United Kingdom. The scenario remains more or less the same in Great Britain, where an end user has to pay nearly 60% of fuel cost in the form of fuel taxes or fuel duty. Diesel is a point lower with 58% of diesel costs being attributed to the fuel duty and VAT. There is a proposal to increase the fuel duty in the UK by around 3 pence, and this should make the fuel pricing move higher when the proposal gets implemented from August 1 onwards.

Where does this leave us with the comparison of fuel duty across some of the European countries? To be honest, the fuel duty across the European countries is very high and there is nothing much to choose between two countries. This is borne out by the following facts:

1.In United Kingdom, the fuel duty and VAT comprise of 60% of petrol price and 58% of diesel price.

2.In the Netherlands, the fuel duty and VAT comprise of 59% of petrol price.

3.In Germany, the duties and VAT comprise of 48% of petrol price.

Does this make Europe a costly proposition as far as fuel is concerned? Well, not if you are in Luxembourg. The fuel duties and VAT are the lowest in the country and account for just 38% of the fuel costs. However, unless you stay in Luxembourg, you have a valid complaint that the VAT and excise taxes are taking a shine off the petrol and diesel barrels.

Fuel Duty in Europe Vs Fuel Duty in the United States

People in Europe are of the opinion that they would be better off in the US. This is in terms of the more fuel-friendly tax structure within the US. Unlike Europe, the US does not impose a VAT on the fuel pricing. However, the federal taxes are imposed on petrol and diesel to allow for budgetary provisions towards the transportation costs within the US. Now, it must be remembered that the fuel pricing and the fuel taxes in the US vary from one state to other.

The Federal excise duty on a litre of petrol comes out to 4.86 cents, while a similar excise levy on diesel comes in the range of 6.45 cents a litre. Together with the State taxes, an average fuel duty within the US comes to 31% of petrol costs and 30% of the diesel costs.

When you compare these numbers against the European countries, you begin to realize that there is a lot of price differential between the US and Europe for both petrol and diesel. Is this something that can be explained or is just that the European fuel levies are consistently higher due to higher crude costs?

It is difficult to talk much about the causes of such a difference between petrol or diesel pricing in Europe and the US. However, one must note that the Brent Crude index is always higher than the crude rates in the NYMEX.

Coming back to the European fuel pricing, one must also remember that 20% of the fuel costs go towards VAT in the United Kingdom. For a registered business, VAT can be re-claimed as part of the normal accounting practices. Assuming a business was to reclaim its VAT, the fuel duty would then get friendlier to the people in Europe. This should make the difference between UK and US fuel pricing become lower, though the UK would never be able to match the lower levies in the US.

Where does all this leave a normal consumer or a business class user who depends heavily on the daily use of petrol or diesel? Apparently, it is clear that the fuel prices in Europe would always be at a premium against the prevailing prices in the US. There is nothing much that can be done.

Given the fact that the annual budgetary provisions of the Governments depend heavily on the fuel excise duty, it is clear that there cannot be a downwards revision of the fuel duties in countries like Germany, United Kingdom, France or the Netherlands. Fuel, being a mass-market product, a simple excise levy on diesel or petrol contributes a lot to the national exchequer. And, as they call it, this is more like effortless money coming into the Government coffers day after day.


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