It has been highlighted in Dáil Éireann today, by Wexford TD Verona Murphy, that VAT on fuels such as petrol and diesel is not only being charged on the cost of the fuel itself, but is also being charged on the other taxes which are applied to fuel such as NORA, Excise Duties and Carbon Taxes.
Before looking at the example below, here is what Deputy Murphy had to say:
The following example illustrates how this works. (Please note that the pre-tax prices are estimates and may fluctuate. Excise duties and NORA are fixed amounts)
Let us look at an example of Petrol first:
| Pre-Tax Price Per Litre | 100c |
| Excise duties (including Carbon Tax) | 62.771c |
| NORA | 2c |
| Price before VAT | 164.771 |
| VAT @ 23% (of 164.771) | 37.897 |
| Price at the Pump | 202.7c |
As you can see, VAT is being charged on the Pre-tax price, but also on the excise duties and carbon taxes. A tax on a tax.
If the government stopped taxing their own taxes, the price would be as follows:
| Pre-Tax Price Per Litre | 100c |
| VAT (@23%) | 23c |
| Price after VAT | 123c |
| Excise duties (including Carbon Tax) | 62.771c |
| NORA | 2c |
| Price at the Pump | 187.8c |
This practice of taxing taxes is currently costing the consumer approximately 15 cent on every litre of petrol.
It’s a similar story with diesel:
| Pre-Tax Price Per Litre | 110c |
| Excise duties (including Carbon Tax) | 51.902 |
| NORA | 2c |
| Price before VAT | 163.902c |
| VAT @ 23% (of 163.902) | 37.697 |
| Price at the Pump | 201.6c |
If the government stopped charging tax on tax with diesel here’s what the price would be:
| Pre-Tax Price Per Litre | 110c |
| VAT (@23%) | 25.3c |
| Price after VAT | 135.3c |
| Excise duties (including Carbon Tax) | 51.902 |
| NORA | 2c |
| Price at the Pump | 189.2c |
With diesel we see approximately 12.4 cent per litre difference. In other words, 12.4cent of this price is simply from taxing a tax.
It will surely come as a surprise to many motorists that not only do you have to pay tax on the product itself, but you are also paying tax on the taxes.
It is also crucial to note that due to the VAT being calculated as a percentage of the overall cost, the amount of revenue the government receives from VAT, increases every time there is a pre-tax price increase.
In other words, the 15cent reductions on diesel and 20cent reductions on petrol announced today are not really reductions to the overall government take at all.
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