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Continental Operating Costs

25th December 1964
Page 32
Page 32, 25th December 1964 — Continental Operating Costs
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Which of the following most accurately describes the problem?

(i) Lodging expenses have been calculated in accordance • with local practice. In Belgium, for instance, for this type of journey no expenses are granted. In other countries these expenses are sometimes a fixed amount per day, hour or kilometre.

(g) Overheads are always difficult to estimate. For this reason it is consistently assumed in this investigation that they come to five per cent of all other costs. These overheads are regarded as consisting of a share of the costs of administration, hire of offices and general technical management which is necessary in order to keep the vehicles in good condition so that they can make the hypothetical journeys. They do not therefore include the costs of commercial management and the trading profit, as these are burdens on sale, which has been left out of the present calculations.

Variations in Cost A summary of the total cost of these hypothetical journeys in the five countries is given in Table 5 with comparison facilitated by showing the lowest cost country (Netherlands) as a notional "100" and relating the other costs to that basic figure.

The foregoing tables reveal rather large differences in cost between the various countries. The differences between the employers' shares of social insurance have already been shown. It is also interesting to compare the prices of diesel oil and the taxes to which it is subject as shown in Table 6. The bulk consumer prices given, however, are only averages. For one thing there are regional differences within each country, and for another the contracts with the oil companies vary according to the annual quantity purchased, the period of the contract and by the way the purchase of the tank and pump is financed.

When calculating the amount of tax it is useful to distinguish between taxes which apply in equal measure to other industries—" normal taxes "—and taxes which apply specifically to road transport. In the lane( group we include Gray taxes on vehicles and the various taxes on fuels. For the sake of simplicity taxes on tyres, which are to be regarded as specific taxes on road transport, have been left Out of consideration. Table 6 gives an impression of the TABLE 5 — COST OF COMPARISON OF HYPOTHETICAL JOURNEYS TOTALLING 80 000 km. degree to which diesel oil is taxed in the various countries. The specific taxes on road transport can now be expressed as a percentage of the total cost of the annual 80,000 km. in our example, and then shown as the total annual cost excluding these taxes.

The result of these calculations is shown in Table 7. It should be noted that when lorries and such like are bought in Belgium, 13 per cent purchase tax has to be paid; as the " normal " purchase tax in Belgium is 6 per cent, the remaining 7 per cent is regarded as a specific tax on road transport.

Rough Indication . Regarding the significance of these cost differences they could be used to substantiate opinions in discussions about problems connected with cross-frontier road transport in the E.E.C. The figures are not ideally suited to this purpose but it must be admitted that, in the absence of better figures, they can serve as a rough indication.

It must be borne in mind that these figures relate exclusively to national conditions. As soon as one starts-making cross-frontier journeys, the costs given here will probably tend to converge. Generally, cross-frontier journeys will be longer than the 160 km. each way assumed here, so that one driver,will not suffice: the position of Italy, for instance, will immediately become more favourable, as two drivers are already compulsory there in any case. A second reason for the differences lessening is the fact that on crossfrontier journeys vehicles from an " expensive " country will incur part of their costs in a "cheap country, and vice versa. Further abolition of trade restrictions within the E.E.C. will lead to greater competition between manufacturers of vehicles and tyres and suppliers of fuel and lubricants.

Harmonization Possible The differences in the taxes imposed on road transport can be harmonized by the governments concerned. Admittedly this is easier said than' done, but with plenty of goodwill it is not impossible. The increasing liberalization of E.E.C. road transport may lead to the remaining differences in cost being automatically reduced. Should there still be any differences after this, they will most probably be caused by the same factors as wilt cause continuing differences within a common market in the prices of everyday commodities.

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