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« UK Conference of Science Journalists | Main | UK energy policy faltering »

VAT on fuel

UK readers will be aware that VAT is levied on energy at a reduced rate of 5% - regardless of the source of the energy.

Here is how National Geographic describes the situation.

A reduced value added tax levied for the use of natural gas for heating fuel and power amounted to a subsidy of $ 2010. The UK also levies a reduced value added tax for petroleum and coal on a smaller scale.

Wow. That's quite a misrepresentation isn't it?

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Reader Comments (42)

But watch the AGW mob lap it up and regurgitate as gospel truth. Within hours it will be just about impossible to refute, even if you show the raw figures - because one of their authorities has said so and therefore it must be true.

Jun 28, 2012 at 2:33 PM | Unregistered CommenterSadButMadLad

National Geographic is one of a host of "nonprofit" organizations clustered around the sinkhole known as Washington, D.C. that are nothing more than gargantuan rackets. Under the cover of carefully nurtured public images, they are nothing more than purveyors of snake oil.

These organizations ( others include— but are hardly limited to— AARP and BOAT US ) are actually huge quasi-commercial businesses that pay no taxes. It's high time this fraud was exposed and their nonprofit status revoked.

National Geographic is particularly loathsome for its flagrant hypocrisy. It is stuffed to the gills with innumerate beneficiaries of affordable and reliable fossil fuel energy.

Jun 28, 2012 at 2:35 PM | Unregistered CommenterDiogenes

They've obviously been getting their information from the Guardian - they're always trotting out the "evil fossil fuels subsidy" line, even though Damian Carrington's own figures showed that over 90% of the so-called "subsidy" in the UK is made up of the reduced rate of VAT (which also applies to domestic energy from renewable sources anyway).

Jun 28, 2012 at 2:51 PM | Unregistered CommenterTurning Tide

They should stick to photography, they are much better at that than at economics.

Let me see, if I buy a couple of shirts at M&S during sales, at a discount price, that means that M&S is subsidizing me, correct?

Jun 28, 2012 at 2:52 PM | Unregistered CommenterPatagon

According to wikipedia, the 'subsidy' on hydrocarbon fuel in the UK is about minus £25 billion.

Jun 28, 2012 at 2:53 PM | Registered CommenterPaul Matthews

If VAT is charged at 5% on energy regardless of its source, what can they mean when they say the the UK levies a reduced value added tax for petroleum and coal on a smaller scale?

Jun 28, 2012 at 2:58 PM | Unregistered CommenterNicholas Hallam

There was I thinking that not only do we pay VAT on petroleum but we also pay VAT on the fuel duty. Aren't we paying double VAT?

Jun 28, 2012 at 2:58 PM | Unregistered CommenterGrumpy


Didn't know that but from their published accounts;

Income 2010, $452,196,000. Expenditure $445,786,000. Tax $0.

Which by their own reasoning makes "Inspiring people to care about the planet since 1888" subsidised and by inference, an evil thing. By association, the World Wide Fund and Green Peas are similarly tainted.

Jun 28, 2012 at 3:16 PM | Unregistered Commentersimpleseekeraftertruth

Nicholas Hallam>

I assumed they meant things like red diesel and heating oil for petroleum, and with coal it's smaller scale because we use more gas.

Paul Matthews>

More like at least 50% higher again. What's amusing about that figure is that the IPCC calls for us to have a $80 per tonne Pigou tax on carbon, and we emit about 500 million tonnes of CO2 annually. To comply with IPCC requests, we should be increasing subsidies to fossil fuels.

Jun 28, 2012 at 3:17 PM | Unregistered Commenterdave

So, is the subsidy claimed on the fact that the product is taxed, or is it based on the fact that the tax is reduced (5%) from its generally set level (17.5%)?

In either case, for it to be a subsidy, the amount paid in tax paid would have to be passed on to the producer...

Jun 28, 2012 at 3:22 PM | Unregistered CommenterSnotrocket

Merely being allowed to exist by bureaucrats is a form of subsidy...we are ungrateful parasites and must sacrifice in order to avert global catastrophe.

Jun 28, 2012 at 3:35 PM | Unregistered CommenterZT

I went through this at the Telegraph.

Their claim is that a reduced tax rate is a subsidy.

Renewables do not pay fuel duty. Thus all renewables receive, in aggregate, a subsidy equal to the amount of fuel duty. £29 billion a year at present.

Don't argue with these idiots: just use their own logic against them.

Jun 28, 2012 at 3:53 PM | Unregistered CommenterTim Worstall

A reduced value added tax levied for the use of natural gas for heating fuel and power amounted to a subsidy of $ 2010. The UK also levies a reduced value added tax for petroleum and coal on a smaller scale.
Nicholas Hallam
To an old hack like myself this is one of the most wonderful "truthful lies" I have come across.
What they are saying (quite correctly) is that the UK also levies a reduced rat of VAT on petroleum and coal. The phrase "on a smaller scale" would appear to be meaningless. What they do not say (quite dishonestly) is that the UK levies the 5% on all energy — as you rightly point out.
What they also do not say (equally dishonestly) is that renewables are subsidised in a variety of ways (feed-in tariff, guaranteed price for the product, etc)
What they want you to think they're saying is that fossil fuels get subsidised and renewables don't.
This one word that describes this.
It's "lie".

I'm not sure about petroleum. Do they mean crude oil?

Jun 28, 2012 at 4:04 PM | Registered CommenterMike Jackson

If National Geographic is so Anti Car and Anti Fossil Fuel why is it making shows that glamourise High performance prestige Gas Guzzlers then

Jun 28, 2012 at 4:42 PM | Unregistered CommenterJamspid

Look, I know the Daily Mail isn't exactly a journal of record, but this article seems pretty accurate:

So, while some energy sources may get off at 5%, it seems that fossil fuels used in vehicles are slugged around 60%, including the full 20% VAT on top of the fuel tax. Fuel tax raises about 27 billion pounds a year, and the 20% VAT goes on top of that.

Doesn't sound like a free ride for fossil fuels to me.

Jun 28, 2012 at 4:44 PM | Unregistered Commenterjohanna

In common with a number of boys of my generation, National Geographic offered an introduction to the female anatomy. I fear that it has not been so instructive since.

Jun 28, 2012 at 4:46 PM | Unregistered CommenterNicholas Hallam

I buy 2300 litres of red diesel at a time, above that quantity I would pay 20% vat instead of the 5% so for this fuel about 500 gallons is the cut off point. For other fuels I expect similar lines are drawn to differentuate between domestic and business consumption.

Jun 28, 2012 at 4:57 PM | Unregistered Commenterjohn Lyon

Looks like future Electric,Gas and Hydrogen cars will have to have higher road tax to make up for loss of revenue on Petrol and Desiel or even a llithium and Graphine Battery Tax

Jun 28, 2012 at 4:59 PM | Unregistered CommenterJamspid

"I buy 2300 litres of red diesel at a time, above that quantity I would pay 20% vat instead of the 5%."

I don't think David Cameron would think much of your morals, John.

Jun 28, 2012 at 5:02 PM | Unregistered CommenterDocBud

Nicholas Hallam>

Ah yes, another form of journalism rendered obsolete by the internet :)

Jun 28, 2012 at 5:02 PM | Unregistered Commenterdave

Similar mentality to the notion that failing to implement the 3p fuel tax rise last week would "cost" the Treasury 500 million quid and they would have to find "savings" elsewhere.

Jun 28, 2012 at 5:05 PM | Registered Commenterwoodentop

Cancelled my subscription to National Geographic years ago, thank goodness.

Jun 28, 2012 at 5:09 PM | Unregistered CommenterRobert Christopher

15 years ago our home's heating oil was 8p a litre. I must remind my wife that now there is tax and VAT on heating oil, it might be 53p a litre, but it's alright because we're getting a "subsidy". After I've told her that, I will be able to turn off the heating, because she will be so incandescent with rage, the whole house will be warm as toast! :-)

Jun 28, 2012 at 5:17 PM | Unregistered CommenterKeith Macdonald

UK vat on fuels used in vehicles is 20%, and that is levied on the fuel cost plus the fuel duty, so we are paying a tax on a tax !
Fuels used for home heating is 5%
Rebated fuels (red diesel etc) are charged at different rates (fuel duty not vat) depending on its use....

Jun 28, 2012 at 5:54 PM | Unregistered CommenterJohn

The byzantine system of subsidies, renewables obligations, carbon price, reduced tax etc etc is surely deliberately designed so that it is extremely difficult to understand and hence easy to make spurious claims.

Jun 28, 2012 at 6:04 PM | Unregistered CommenterDavid C

By the same yardstick childrens clothes, basic foods and most importantly, Jaffa Cakes, are subsidised because they attract a zero rate of VAT rather than being VAT exempt.

The producers of fossil fuels do not receive that $4.4bn to allow them to sell them at a lower cost. The consumers of fossil fuels do not receive that $4.4bn to allow them to pay for the fuels. It is not a subsidy.

Jun 28, 2012 at 6:10 PM | Unregistered CommenterGareth

Perhaps the Nat Geog should campaign for UK duty on american gas (petrol). See how they like the 'subsidy' then...

Jun 28, 2012 at 6:20 PM | Unregistered CommenterJames P

@John: "so we are paying a tax on a tax !"

And if I invoice you for services rendered and include my retail motor fuel expenses, I vat that too. You pay for the fuel and fuel tax, plus vat, plus vat. If you cannot claim the vat back, the vat element you have paid on the fuel expense I passed on to you is 44%. That's how it works.

Jun 28, 2012 at 6:48 PM | Unregistered CommenterFilbert Cobb

It's very simple, if you believe that everything belongs to the state then you believe that if the state isn't getting the appropriate share then it's giving money. It is a widespread disease recently labelled Polytoynbeitis, and is, like ME before it, is a disease almost exclusively among the bien pensant upper middle classes in metropolitan London.

Researchers have yet to find a cure, but have noticed that those who do recover from the disease only do so as septagenarians, although Anthony Wedgewood Benn is hanging on in there.

BUPA is intending to open a special unit dealing with the disease as those who contract it and haven't worked for the NHS invariably hold private medical insurance.

There is a body of thought that George Monbiot is suffering from it, as the symptoms appear in his writings from time to time, but statistical analysis of the output from the great man appears to carry too much noise for experts to detect the Polytoynbeitis symptoms.

Jun 28, 2012 at 6:54 PM | Unregistered Commentergeronimo

Fuel cost are represented in CPI so by not increasing fuel duty just before September when the CPI is used to calculate annual increases in pensions and other benifits the treasury could save a lot of money. I don't have the information to do the calculation but it could even be self financing ? Ho ! and it is only postponed until January 2013.

Jun 28, 2012 at 6:54 PM | Unregistered CommenterRoss Lea

Nat Geo got its Oil subsidy Data or Properganda from The International Energy Association

They said the biggest source of Green House Gas is Energy related CO2
But its actually Naturally occuring Water Vapour

The IEA .
So Bish whats the story on this crew .
They just another bunch of Global Warming groupies on the make
So who sits on their Board any familiar names.

Its a lovely sunny Thursday evening in Catford Lewisham Bellingham South East London at the moment.
Dont supposed any of them have ever had to sit at home wrapped up in the middle of Winter in the dark no lights freezing with their parents and their kids.

Jun 28, 2012 at 6:59 PM | Unregistered CommenterJamspid

Well, this goes to the heart of the difference in thinking between left and right. For the right, all of your money is your own and for the benefit of civil society, some is given to the collective (State). For the left, all of your money is the State's and it then generously gives some back by not taxing it.

Jun 28, 2012 at 7:29 PM | Unregistered CommenterRobinson

Ironic isn't it, fuels receive a lower 'subsidy' than National Geographic, which is VAT zero-rated in the UK.

Jun 28, 2012 at 7:41 PM | Unregistered CommenterJoe Public

Maria-van-der-Hoeven unfortunatley not a super model. Just a another Petty Bureaucrat
She ever registered on the Radar
Head of The IEA where Nat Geo got this story from
Give the people cheap reliable Exploitable Fossil Fuel
Let proper innovation in Alternative Energy Sources and Conservation properly develop and grow at its correct pace.
Instead pushing and forcing costly renewables it with all its consequences
( That includes making the public Resentfull and Dismissive of Climate Science and Scientices ) Energy that will of course be Abundant Efficient Economic Reliable Cleaner Accapted and Welcomed
Because Maria-van-der-Hoeven we wont need you or your organisation

Jun 28, 2012 at 7:59 PM | Unregistered CommenterJamspid

The outright lies and misrepresentation [being charitable] is gobsmacking given the bodies who are indulging in it. My question is whether they've always been this dishonest and now we're finding out or whether this is a new globalist thing since the 90s.

Jun 28, 2012 at 8:43 PM | Unregistered Commenterjames higham

So, is the subsidy claimed on the fact that the product is taxed, or is it based on the fact that the tax is reduced (5%) from its generally set level (17.5%)?


If you think VAT is 17.5%, have I got news for you ...

Jun 28, 2012 at 8:46 PM | Unregistered CommenterBilly Liar

I covered this elsewhere, when some idiot parroted a Grauniad article that quoted the highly misleading OECD research:

Posted - 08 June 2012 23:53


The OECD "data" for fossil fuels is derived from concluding that the 5% VAT rate applied to domestic energy consumption represents a subsidy, relative to the standard 20% VAT rate. This, of course, is complete balls, since:

- an absence of tax is not a subsidy
- one would have to conclude that the government was subsidising food bills by a huge amount, since food is generally zero-rated.
- the reduced rate also applies to renewables energy, so there is no subsidy of fossil fuels, merely a subsidy of consumers' use of energy.

Fossil fuels are major contributors to the Exchequer. Renewables, by contrast, are massively subsidised, both directly by the taxpayers and by government-imposed obligations on electricity providers.

I note in passing that consumer energy is only the subject of lower rates of VAT, because Labour refused to countenance it being imposed at the standard rate - a refusal entirely at odds with its alleged environmental credentials.

Jun 28, 2012 at 8:47 PM | Unregistered CommenterB0YC0TT

As somebody who buys things from commercial suppliers and rarely on the high street, I am inured to the pricing being +postage & VAT.

Over the last few years I have taken to doing the arithmetic when I buy vehicle fuel to breaking out the tax as I stroll over to tap in my debit card PIN at the counter and if the cashier announces the bill, I rather enjoy rattling off the price "plus tax". The effect is variable... but in general it's positive - many are simply unaware and gratifyingly shocked at their position as tax collectors on an epic scale.

Jun 28, 2012 at 9:13 PM | Unregistered CommenterTomO

Petrol and diesel are raw materials for virtually everything in our modern society. What other raw materials are effectively taxed 4 times? In the case of road fuel:

1. Petroleum revenue tax on oil companies
2. Corporation tax
3. Fuel duty
4. VAT (inlcuding tax on a tax ie post addition of fuel duty)

Petrol and diesel are effectively taxed at 400%. Subsidy? My arse...

Jun 28, 2012 at 9:40 PM | Unregistered CommenterThinkingScientist

Another way of looking at the issue is that the lower VAT rate is politically justified as VAT is a regressive tax. So is the National Geographic in favor of attacking the poor and elderly? That is how the Labour Party would spin the issue if the Government followed National Geographic recommendations.

Jun 28, 2012 at 9:55 PM | Unregistered CommenterManicBeancounter

Cesspit owners can have their methane-venting ordure sucked out at 0% VAT. But if they use the same vehicle to empty their swimming pool, they will be billed at 20% VAT by the same contractor. Why? Government sanctioned 'subsidised' sh*t.

Plus Ring Fenced Corporation Tax Supplementary Charge of 10-20%

Jun 28, 2012 at 9:56 PM | Registered CommenterPharos

When I worked offshore in the North Sea I had to start a limited company up. I spoke to my accountant and he said that I didn't need to be VAT registered because all of my work was outside the 12 mile limit. I told them that everyone else - and every company - who works offshore and is self employed, charges VAT.

I don't work - or live - in the UK any more. Problem solved.

Jun 29, 2012 at 3:35 AM | Unregistered CommenterJimmy Haigh

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