Australia's low fuel costs

Study shows australian businesses are enjoying some of the world's lowest fuel costs

Petrol TaxesWith rumours of an impending fuel levy increase to be announced in the federal budget a new study by UHY, the international accountancy network has revealed that Australia has amongst the lowest petrol taxes of any major world economy.

UHY’s 20-country comparison research highlights Australia’s low fuel tax rates levying 25% on petrol and 24% on diesel, are considerably lower than many other major developed economies. (see pages 3-4 for details)

For example, the cost of filling the tank * of a Ford Transit van with diesel in Australia is US $116.13, nearly 40% less than the cost in the UK, where the price of diesel is highest. The UK, France and Germany all levy taxes of at least 60% on gasoline, and between 40-60% for diesel. **

At 8%, Australia’s taxation on LPG is also far lower than most other major economies studied. The UK is the highest, with a fuel levy taxes of 60%.

David Tomasi, Chairman of UHY Haines Norton Australia, said Australians generally think they are getting raw deal when it comes to fuel but the international reality is very different.

“Whilst we may think our fuel prices are high, they’re not in comparison to the rest of the world and this fact actually may have contributed to helping Australia control cost structures during the GFC,” he said.

“Keeping taxes on diesel low is particularly beneficial for key drivers of economic recovery like fast-growing small and medium businesses that run fleets of commercial vehicles in the distribution and retail sectors.

“It is important to note however that while our fuel taxes are comparatively low internationally, on a cost per litre basis, the vast distances within Australia and the dependence on motor vehicles by the population does equate to a higher total amount paid on fuel as a percentage of disposable income compared to many other countries.”

UHY adds that most emerging economies have considerably lower levels of taxation on fuel than developed economies. In Malaysia, the government even offers generous subsidies on fuel.

David Tomasi explains: “Emerging market economies are much more focused on growth, and providing assistance to businesses through lower taxation and subsidies where necessary.”

“The Malaysian economy is one that levies low taxes on consumption in general, and focuses on direct taxation of businesses, such as through corporation tax, as the key generator of revenue.”

These subsidies are reported to cost the Malaysian government an estimated US $14 billion per year. The subsidies have also led to issues with the smuggling of fuel into neighbouring China and Indonesia, which have a much higher cost of fuel.

“While the Malaysian government does lose a lot of money by having a fuel subsidy, it has determined that it makes such a contribution to the country’s strong GDP growth that it is willing to accept the loss.

“That could be food for thought for the Australian government.” Mr Tomasi said.

Download the full press release here.