Sunday, 14 February 2016

Tax hikes on petrol on the way ?

But that's good news for us, the consumers who benefit from cheaper oil, so bring it on - David McWillams, Irish Economist, February 2016 [Sunday Business Post].

When the Socialist Portuguese government submitted their budget to the EU last week, they were told they had breached EU rules. They then put new measures together including tax hikes on petrol products which were accepted by the EU. The hike was justified "to counteract the environmental impact of low oil prices resulting from increased consumption".

One can see a mainstream Irish government lapping this one up - what a lovely way to raise taxes by telling people higher taxes will be good for them. Of course, most economists know that petrol and diesel are relatively inelastic products - consumption will not be affected much by changes in price. Instead, during times of low oil prices, consumers find they have more in their pocket to spend on other goods and so it should be. People deserve a break and it's good for local economies. But this will end once the watchful eye of the Government focuses on such "easy pickings". 

This could well be the hidden General Election issue here in Ireland - none of the Parties nor the media are mentioning it, but after water charges and property taxes, one can easily see an Irish government paying for auction type politics (with cuts in income tax and USC being promised by most of the parties) by putting more taxes on low petrol prices. Fiscal space means more green taxes. It's easier than confronting Apple and Google.

It's also worth noting that petrol is an allowable vouched expense for politicians so they won't be impacted by tax hikes on petrol. 

So now you know what to ask candidates when they arrive at your door.  

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