When fuel prices rise, fuel duties are bound to be unpopular. However, even if politicians find themselves able to afford significant tax reductions, they are not the right taxes to cut. They bring in large amounts of revenue, are progressive (at least in the UK) and they encourage the development of alternative energy sources. Politicians must stop posturing and realise that when the price of fuel rises, drivers must pay more or drive less.
In April, Senator John McCain, the Republican presidential nominee, proposed a “gas tax holiday” in the US – abolishing fuel duty for the summer. In May, President Nicolas Sarkozy of France suggested reducing value added tax on fuels. This week, it was the turn of George Osborne, Conservative shadow chancellor in the UK, who unveiled plans to reduce the sensitivity of consumer petrol prices to the oil price.
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