Why does the fuel levy benefit the rich?
Every user-pays system has two criteria. It identifies that asset being funded, which the user is using. It identifies how much the use of the asset that the user is using.
If it doesn’t do that then it is not user-pays, but some other system.
The fuel levy has been frequently offered as a proxy for “user-pays” but it has some very obvious drawbacks. The most obvious is that the user of fuel is not necessarily equivalent of the user of a specific road. The fuel purchased could be for many uses from water pump to lawn mower. Secondly the vehicle may never be used on the road.
As an ongoing method of road funding the fuel levy cannot work. It’s a reducing source of funds and in order to keep pace with reduced fuel consumption it constantly needs to be raised – which has the inevitable consumer backlash.
However, believe it or not, the real fact is that the fuel levy benefits the rich. It’s simply unsustainable with the growth in sales of more fuel-efficient vehicles and the increase in the use of electric and hybrid cars. 20-years ago the fuel levy was close to 100% efficiency but research shows that in 20 years, it will be way below 50%.
Trends extracted from leading global studies reveal that with the future of hybrid and electric vehicle purchases predicted at over 50% globally within 15 years, the fuel levy will be… well, inefficient.
What does that really mean? Simply, the fuel levy isn’t a sustainable solution, for anyone. Those that can afford the vehicles of the future may well have even more money but will there be decent roads to drive them on, or charging stations on their 6-hour journey to reach Pretoria from Johannesburg?
Let’s leave that very real fact, right there.
“It’s being estimated that by 2040, electric cars could make up 30 to 40% of the world’s two billion cars. Together with the increased fuel efficiency of internal combustion vehicles, this would translate into savings of millions of barrels oil a year. And, of course, savings in fuel levies and taxes.” https://www.moneyweb.co.za/mymoney/moneyweb-tax/fuel-levy-needs-a-rethink/