Fuel Tax

Fuel tax is also called as petrol tax, gas tax, gasoline tax, or fuel duty. The fuel tax is a type of a sales tax which is imposed on the sale of fuel. The fuel tax is one of the important factors pertaining to taxation in many countries.

The fuel tax in some countries is mostly hypothecated to roadways and transportation facilities such as in United States. The fuel tax in several other countries is regarded as the source of general type of revenue income. The fuel tax is mostly imposed on the fuel which is used for the purpose of transportation and not imposed on fuel used for the purpose of running agricultural vehicles, used as heating oil in households and other non transportation uses.

The demand for petrol is not very elastic in nature, so the fuel tax will regarded as a revenue generating source in the short run of the economy but as time passes, in the long run as per the theory of the experts, the populace would lower the consumption of fuel by the means of mass transit systems, fuel economic transport facilities, alternative source of fuel, etc and the sale of the fuel would fall, bringing down the tax revenue on the fuel. Some of the environmentalists are thinking of the idea of introducing fuel tax as a method of checking the pollution due to the burning of fossil fuels.

The difference in fuel taxes in different countries poses a major problem to the global economy. The difference provokes cross border illegal trade of the fuel from one country to another. This is very evident in the continent of the Europe where there is very less control on the borders and added to this is the variable fuel tax rates which encourages the illegal trade of the fuel used for the purpose of transportation. In most of the countries, the custom duty restrictions allow the import of the fuel contents in the integral fuel unit of the vehicle as duty free. In Singapore, the custom regulations department even checks out the fuel gauge of the vehicles for in Singapore customs department charges a higher rate of fuel tax for the people importing more than 75% of the tank capacity of fuel to check the duty free import of fuel at lower rate from the neighboring Malaysia. In United States of America the fuel tax was introduced in the year 1919. The rate of fuel tax was 1% for every US gallon. At present, most of the states in US have introduced fuel tax.