Britain's high taxes lead to smaller cars

Oct 17, 2004 02:00 AM

In Britain, drivers pay nearly three times what Americans do for gasoline at the pump, and the high taxes that cause the huge difference have never managed to achieve one of the government's main goals: reducing the number of cars on the road. But they have dramatically increased the number of small, fuel-efficient cars that Britons drive, and as oil prices continue to climb on world markets, some Britons believe the gas-guzzling United States has to find a way of doing that too.
"Big cars are part of the culture over there. They've got to get out of that mind-set," said Rob Surtees, 26, a film location specialist who pulled up at a Texaco station in central London in a Fiat Bravo.

In America, consumers now spend an average of $ 1.94 for a gallon for regular fuel. In Britain, that price is $ 5.66, making it some of the world's most expensive gas. For years, British governments have repeatedly raised gas taxes, often over the rate of inflation, with several goals in mind: reducing the number of drivers, improving the environment and raising revenue.
Today, about 75 % of the price at the pump is tax, compared to an average of about 22 % in the United States in August. In Britain, where new cars are often expensive, drivers also must pay a heavy sales tax when they buy one, and an annual fee for a driver's permit. On top of that, insurance for drivers is mandatory.

People who buy small, fuel-efficient cars are rewarded with a lower sales tax, and such a move can even reduce the amount of income tax that an employee pays for a common perk in the United Kingdom: buying one's own company car.
Richard Freeman, a spokesman for Britain's Automobile Association, said the high taxes have failed to reduce the number of cars driven or licenses issued in Britain.
"There is no evidence that people don't buy a car because they can't afford the fuel tax. Even low-income families will not give one up. For many of them it is a lifeline, it is needed for their job. So they'll give up holidays, reducetheir leisure activity, even downgrade the types of clothes they buy to hold onto their cars," Freeman said.

But even Freeman, who opposes the gas taxes and thinks Britons are sick of them, admits that they have had some success, and that countries like the United States should take note. For one thing, the steep fuel prices and the tax benefits offered to buyers of smaller, gas-efficient cars have dramatically increased the number of people who drive such vehicles and the competition of automobile manufactures to make them.
From 1994 to 2003, the number of those cars sold in Britain rose from 26 % of the total market to 34 %, according to the Society of Motor Manufactures and Traders. That is one reason that even though the number of cars on the road in Britain is increasing, the amount of carbon dioxide that vehicles emit nationwide has remained relatively flat for the last five years, said the Department of Environment, Food and Rural Affairs.

Overall, gas consumption fell in Britain by 2 % last year, but it is on the rise this year, said the Petrol Retailers Association.
Americans should consider slowly raising gas prices to motivate drivers to buy -- and big manufacturers like Ford and GM to make -- more compact, fuel-efficient vehicles. The last time that trend materialized in the United States was during the 1970s oil crisis.

Cal Hodge, president of A 2nd Opinion, a consultancy in Houston that specializes in fuel and regulatory issues, said Americans would never tolerate fuel taxes like Britain's and that politicians who approved them would soon be voted out of office.
"The British model wouldn't work in the States because we drive so dang much and drive such large, inefficient cars," he said.
Instead, Hodge said, the US government should increase the sales tax on vehicles such as Humvees and SUVs and provide tax rebates on small, fuel-efficient models.

Source: Associated Press
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