FUEL TAXATION AND ITS ALTERNATIVES.
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A Consideration of Principles.
N HIS BUDGET statement, the Chancellor of the Exchequer forecasted the possibility of the abandonment of the petrol tax. Judging by his words, we cannot take this to mean that taxation of motor vehicles or their use is to be abolished, but, rather, that he dislikes the present impost because of the difficulties and expense of collecting, and would Eke to replace it hy. something else that could be .worked more simply and cheaply. He hints at the idea that increasedcar licence's might meet the requirement, but admits that a fair scheme "could only be wprked oat after conference with the various interests affected."
No doubt, when the whole subject comes to be thrashed out, nernerous alternatives to-the petrol tax will be considered. For the moment, the choice put before us appeats to lie between the taxation of fuel and the raising of a •similax-revenue by the huposition of licence duties on vehicles. Let us consider the relative merits of these two systems from the point of view of fundamental principles. If any tax can be ideal to those who would prefer not to be taxed at all; we may attempt to decide what would be the qualities of an ideal tax.
First and foremost, the ideal tax must be absolutely equitable. We must know for what purpose it is imposed, and we must then make it such that the contribution in every case is exactly just. In the present instance, we may start with the assumption that the purpose of any motor taxation is to raise revenue for the improvement of roads, because motor users want this improvement and the employment of their vehicles involves expenditure upon the highways. Thus, we arrive immediately at the principle' that the ideal tax must work out so that the contribution paid in respect of each vehicle is exactly proportionate to the use that vehicle makes of the roads.
This use, from the point of view of road maintenance or improvement, can only be estimated fairly by taking into account the weight of the vehicle, the distribution of that 'weight, the character of the tyres,, the diameter of the wheels, the weight of the load care red, and the speed at which the vehicle travels. Some of these items are roughly regulated by the law governing the design and use of road vehicles. If we can make our tax proportionate to speed and toted weight and to the mileage covered, then we shall nearly if not quite attain the ideal.
The taxation of fuel appears to offer a means of getting somewhere near the ideal. If we take a number of vehicles of a given type the fuel consumption of each will be proportionate to the mileage covered. If we take a number of equally well-designed vehicles of different load capacity, the fuel consumption will be more or less proportionate to the total weight of vehicle and load. If we take any given vehicle and drive it at varying speeds, the fuel owlgumption over a given mileage would bear at least some relationto the speed, the consumption being greater if the speed is higher. A fuel tax is therefore a tax which feflecte the use made of the road and the expense involved in road maintenance. From this point of view it is thoroughly good.
From the point of View of colletion, we know it to be bad. It is also defective in its present form, inasmuch as it is applied only to the fuels of certain classes of vehicle. It permits the steam vehicle, using solid fuel, and the electric vehicle, 'obtaining its power originally from a central station, to have free use of the roads. This differentiation is evidently unfair, and is rendered all the more so because, as a general thing, both the steam and the electric vehi cle are heavier than the petrol vehicle of equal speed and load capacity. In practice, it would not be possible to apply a similar, tax to the fuel of steam and electric vehicles. We have therefore indicated an in, herent fault which cannot be overlooked, There-is, however, another •way of looking at this matter. We might exempt from all taxation fuel produced within the British Isles and partly exempt fuel imported from the Empire Overseas. This is, in
.fact, policY to which the present Chancellor of the Exchequer subscribes. If we accept this policy, then there is no reason why we should tax coal. or coke used in steam vehicles or employed to generate electricity for the batteries of electric vehicles. We could defend the proposal of the fuel tax on the grounds that the man who chooses to use imported foreign fuels must contribute to the revenue for the privilege. From thiletandpoint, the fuel tax in its present form is not far from ideal, and we Must remember that the eountry is now pledged to a policy of Imperial preference.
• When compared with our ideal tax, any form of liceuce. duty mist be very wide of the mark. Such a duty may'be.based'on any or all of a number of factors. It may take into account the engine power of
the vehicle, its unladen weight, its laden weight, its speed, the nature of its tyres, the size of its wheels, and a dozen other points. It may, therefore; be made more or less proportionate to a combination of the sPeed and weight of the vehicle. It cannot conceivably bear any relation to the mileage which every vehicle covers. From this point of View it is
therefore entirely wrong, because the wear of, the roads by any specific vehicle must be'proportionate to the mileage. In practice, a licence duty can hardly escape from being based partly, if not wholly; on the horse-power of the engine which propels the vehicle. Horse-power can only be estimated for purposes of taxation by employing a formula which takes into account certain engine dimensions. No formula will give an ,exactly accurate result in all cases: All formulae' are arbitrary,, and it is impossible to produce any formula which' does not tend toencourage design to become abnormal in some direction or others . A formula may encourage an exceptionally long or an exceptionally Short stroke of the piston. It may encourage or discourage high or low speed of revolution of the crankshaft. It may have any one of a score of effects but it cannot be so cunningly devised as not to tend to have any effect on design at all.
So long as licence duties are small in amount, their
effect may be negligible or nearly so. Directly we depend on them for the raising of a substantial revenue such duties, if based at all upon a horsepower formula, must incline to produce abnormality in design. The consequence of such duties on a big scale would almost certainly be to compel manufacturers to bring out for the British home market a type of vehicle specially intended to economize in taxation and therefore sacrificing other good qualities with that object in view. Such a vehicle would not appeal to buyers overseas. Consequently, by injudicious taxation, we should have closed the door of the overseas markets against the products of the British industry. One can hardly imagine a more detrimental result.
Summing up the argument for the tinae being, it is clear that if we merely consider fuel taxation and • licence duties, as we know both of them at pr:psent, it is far better that a given revenue should be raised by the taxation of fuel than that the same revenue should be obtained by the method at which the Chancellor of the Exchequer has tentatively hinted.