Inflexible fuel tax rules are a missed opportunity for small businesses to thrive

After years of happily operating in a tight knit, thick-as-thieves price fixing cartel, the OPEC countries have flooded the market with cheap fuel. You’d think this would be a reason to be cheerful for most of us. Cheaper to run your car, old folks can actually afford to heat their homes, cheaper seats on airlines…sounds great doesn’t it?

Especially for small businesses, where transport and logistics makes up a sizable chunk of annual spend.

But as long as fuel is taxed per litre, not per the cash value of a litre, consumers will never reap the benefits of these bizarre market conditions. Which is a crying shame, because if the benefit was passed on, the low cost of fuel could act like a tidy little tax break for small businesses and get the economy trucking along nicely.

Brent crude, which cost about $106 a barrel in June 2014, has nosedived 64% in the last 18 months to around $37.91, its lowest price for seven years.

In such circumstances, rigidly sticking to a fixed 58p a litre seems like an opportunity missed (plus VAT, don’t forget there is 20% VAT on fuel, effectively a tax-on-a-tax…The Chancellor operating in full-on Sheriff of Nottingham mode there).

Remove the red tape, pass the benefits on

Seeing as the Tories are all about cuts and market forces and removing red tape and more cuts, surely the right ‘on message’ thing for them to do would be to pass the positive effects of market forces onto the average Joe?

It could mean lower shipping costs, food prices, materials costs, more disposable income for citizens. Yes, it would lose a few quid in the tax coffers…but cash would find its way back in other taxes and benefits, as business owners are able to hire more people, sell more products and services, take their families out to local tourism spots at weekends, etc. etc. That could prove an excellent natural stimulus, boosting the economy and quality of life at the same time.

Yes there are emissions targets to hit, but they should be achieved by improving technologies, not taxing people so much they can only afford to stay stationary. If the government really wanted to commit to reducing road congestion and vehicle emissions, they would make road tax per mile of a journey…

Oil prices won’t stay on the floor for long anyway – if BP are to be believed, and their predictions of there being a only 53 worth years of oil left, then I’m sure the OPEC nations will want to extract maximum value from their product and they’ll be back to their cosy little price-fixing arrangement soon enough (and if you were wondering how and why OPEC is even legit, companies cannot sign a deal agree to price fix, but sovereign nations can!).

Prices will rise. This drop is temporary.

My gut feel that if we played our hand right, and put fuel tax on a sliding scale capped at 58p with immediate effect, the lost tax revenue would more than make up for it in added value to the UK economy.

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If you want some advice on pushing your business to the next level, drop me a line at bkench@thebusinessbooster.co.uk

photo credit: <a href=”http://www.flickr.com/photos/44846675@N04/23251149714″>Ballard Petroleum</a> via <a href=”http://photopin.com”>photopin</a> <a href=”https://creativecommons.org/licenses/by-nc/2.0/”>(license)</a>