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Indirect taxes

Indirect taxes. Andrew Leicester. Main Budget measures. Alcohol duties Fuel duties Vehicle excise duty Aviation duty Plastic bag tax?. Alcohol taxes. Big increases 6% above inflation immediately 2% above inflation every year until 2013 Raises £400m in 2008-09, nearer £1bn by 2013-14

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Indirect taxes

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  1. Indirect taxes Andrew Leicester

  2. Main Budget measures • Alcohol duties • Fuel duties • Vehicle excise duty • Aviation duty • Plastic bag tax?

  3. Alcohol taxes • Big increases • 6% above inflation immediately • 2% above inflation every year until 2013 • Raises £400m in 2008-09, nearer £1bn by 2013-14 • Reverses trend since 1997 • First real increase under Labour • Duty on spirits frozen since 1998

  4. Alcohol duties after the BudgetReal terms, May 1997 = 100

  5. Alcohol taxes • Big increases • 6% above inflation immediately • 2% above inflation every year until 2013 • Raises £400m in 2008-09, nearer £1bn by 2013-14 • Reverses trend since 1997 • First real increase under Labour • Duty on spirits frozen since 1998 • Changing behaviour or raising revenue? • Some of each • Revenue comes from beer and wine: spirits duty raises little • Cross-border shopping erodes revenue without cutting consumption

  6. Fuel taxes • Planned 2p increase in main duty rates postponed until October 2008: cost £550m in 2008 – 09 • Inflation rise of 1.84p in April 2009 still planned • Inflation plus ½p rise announced for April 2010: raises £270m in 2010 – 11

  7. Petrol dutyPence per litre, January 2008 prices

  8. Fuel taxes • Planned 2p increase in main duty rates postponed until October 2008: cost £550m in 2008 – 09 • Inflation rise of 1.84p in April 2009 still planned • Inflation plus ½p rise announced for April 2010: raises £270m in 2010 – 11 • ‘Postponed’ increases have sometimes never happened • Will oil prices fall by October? • What is the value in pre-announcing? • 20p/litre differential for biofuels to go in April 2010 • Raises £550m in 2010 – 11 • replaced by RTFO: 5% of fuel sales to be renewables by 2010

  9. Vehicle excise duty • From April 2009 increase from 7 to 13 emissions bands • Finer targeting • Rates more heavily tilted towards higher emission vehicles • From April 2010, different rate in first year • Even more tilted towards higher emission vehicles • £950 for most polluting, £0 for least • Do people respond to up front taxes more strongly than equivalent annual taxes? • Might people hold on to more polluting vehicles for longer? • Raises £735m in 2010 – 11

  10. Some other changes • Aviation Duty • PBR announced reform to per-plane charge from 2009 • Now to raise 10% more in 2011 – 12: around £250m? • Plastic Bags • Possible tax if insufficient voluntary progress towards charging by 2009 • Any revenues to environmental charities • Irish experience suggests large change in behaviour – little revenue

  11. A ‘green’ budget? • Significant green tax rises • But not this year • Unlikely to reverse long-term decline in green taxes as a share of GDP • Now at lowest level since 1980s • Tax receipts not the whole story • ETS auctioning • Development of RTFO • ‘Greening’ the tax system • Road pricing resuscitated?

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