Sunday, 6 January 2013

VAT and Eddie - trucks and trailers

I wasn’t planning to write about tax – I get enough of it at work – but I am on a roll here so here’s another one, this time loosely about VAT.

Firstly, HGVs account for a disproportionately large number of fatal and serious casualties on London’s roads – nearly half, for about 4% of London road traffic.  I don’t think the position is quite so stark for the nation as a whole but it is still out of proportion.  The incidents do of course have common themes, around junctions, and lack of visibility from the driver’s cab, whether that problem is soluble or not.

HGVs make huge demands on our roads.  To accommodate an aggregates truck or a 15m, 44 tonne articulated lorry, roads have to be straighter, larger, and stronger than would be needed for cars and small vans.  More so by orders of magnitude than what is needed for a cycle path.  Straighter, wider etc roads are more dangerous, both for car drivers and their passengers but especially for vulnerable road users, mainly pedestrians and cyclists.  Perhaps they should not be, but making a road straighter or wider also makes it faster, and “risk compensation” kicks in.

I can only assume also that 15m artics – soon to be up to 18m – will impose constraints on any move to change the geometry of our roads to make them safer for cyclists and pedestrians.  They would not be able to manoeuvre around sharp right-angle corners, or turns and circles with tight radii, so limiting what can be done to reduce the radii of roundabouts to make them safer.  So road danger from cars as well will not be tamed as much as it should.

Now, yer average Mail-on-Sunday reading motorist may blather on at you about how you “don’t pay road tax”.  My what fun we can have with that!

Q:  Is road tax (VED) a contribution to roads, or a tax on pollution?

A:  The latter

Q:  Do taxes on motorists (VED and fuel duties/taxes) go to pay for roads, or is it general taxation which pays?

A:  The latter

Q:  Is the cost of roads fully covered by VED & fuel duties?

A:  Moot point.  Certainly this report  argues that once you include the cost of “externalities” such as general pollution, congestion, public health etc costs, the cost exceeds revenue from motoring taxes.  By how much depends on which externalities you include, and how you value them.

Whatever.  Do HGVs pay their fair share towards the cost of roads?  They demand roads which exceed the construction standards required by ordinary cars.  They demand road geometries which are not needed for cars and which make roads more dangerous, for vulnerable users especially, so contributing towards their observed higher impact on KSIs, which are certainly part of those externalities.  They cause a great deal more damage and wear & tear to roads requiring maintenance and repair – the impact, per axle, on road damage is roughly proportional to the square of weight, so a 44 tonne truck on 4 or 5 axles weighs 40 times as much as a family hatchback, or a good 15 times as much per axle, which translates to about 200 time as much damage, per mile.

Even if they did the same mileage as a family hatchback, which of course they don’t.

Do they pay 200+ times as much in all motoring taxes?

Well, the maximum VED for a 44 tonne “semi-trailer” artic is £1,850.  That is little more than 10 times the rate for a typical Band F family car, at £135.  What about fuel?  Clearly they use a lot more of it, per mile and especially overall, but they pay the same for diesel as I do for my Peugeot 307.

Except that they don’t, because they don’t pay VAT.  “But surely everyone pays VAT?” you cry.  Actually, no.  VAT stands for value added tax, and it means what it says – at each step in the supply chain, tax is paid on the value added, ie the profit margin taken by that supplier.  Each supplier in the chain pays 20% VAT on its payments to its own suppliers, and charges 20% VAT on its supplies to its customers, but the only cash paid over to HMRC is on the difference between the two, as the “input” tax is claimed as a credit.

If the supplier is supplying goods subject to a zero-rate VAT – children’s clothes, most food, pharmaceuticals, passenger transport etc – their “output” VAT is less than their “input” and HMRC actually gives money back to them!

The effect is that the road haulier actually does not pay VAT on its fuel, any more than it does on maintenance costs and several other things which normally attract VAT.  So it pays 1/6th less in effect for its fuel, or about 30% less fuel taxes than a private consumer of fuel – a private car driver – pays.

It gets worse, the value added concept is a bit like a snowball – as it rolls down the hill, it gets bigger – and it is the kid at the bottom of the hill that picks up the final snowball.  It is the end-user, the private consumer buying goods or services retail, who pays the road haulier’s VAT bill hence a third of their “road taxes”.

And they talk about rail being subsidised!

Q:  what do you think is one of the most loudly and clearly heard commercial interest groups in Westminster and Downing Street?

A:  the road haulage industry

Q:  which industry do you think is one of the heaviest spenders on advertising and lobbyists?

A:  the road haulage industry

Q:  which industry do you think enjoys more positive, free publicity than almost any other?

A:  think “Eddie Stobart – Trucks & Trailers”

Q:  who do you think are the arsiest, bolshiest protesters every time there is a proposed increase in fuel duties, and most active in blockading filling stations etc?

A:  this is getting boring, the answer is the same every time!

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