Managing fuel duty and tax reductions in times of volatility

While many consumers are feeling the pinch of cost of living increases and record fuel price rises, we have seen Governments of some countries reduce their tax rates to try to ease the pressure on both consumers and fuel retailers.

April 18, 2022|2 minutes

Recent global tensions have led to yet another challenging period for fuel retailers.

Globally, fuel price rises have made the headlines, and ongoing fluctuations in the price of oil have led to fuel price volatility that is impacting fuel retailers everywhere.

There is little that can be done to control the external situation, but there are some steps to take to protect yourself and your brand during these challenging times.

We have recently published a series of blogs to share insight and advice on different issues fuel retailers are facing right now

While many consumers are feeling the pinch of cost of living increases and record fuel price rises, we have seen Governments of some countries reduce their tax rates to try to ease the pressure on both consumers and fuel retailers.

Examples from around the world

Duties and VAT rates differ by country but across the world, they typically account for around 50% of the fuel price. Kalibrate’s margins and taxes data in Canada shows that taxes there make up almost 60% of the retail pump price.

New Zealand cut excise duty by 25c per liter on March 13, causing fuel prices to return to the level they were 4 weeks before.

Link: NZHerald – Petrol price: New Zealanders react to temporary fuel tax cuts

Other fuel duty cuts have been made in Ireland, Netherlands, France, Italy, and Poland

Advice

Passing the cost-saving onto consumers is vital.

Consumers will be aware of the tax cut and will expect to see a significant change in pump price. If pump prices decrease by less than the expected amount, ensure you have data that validates your decisions to counteract any price gouging investigations.

Changes in duty rates should be reflected across all your systems, including account and pricing tools to preserve the accuracy of margin calculations.

Supply teams and finance teams will need to ensure that they are aware of the supply changes and the impact of geopolitical scenarios, as well as understanding how duty changes will affect different products and purchasing agreements.