Op-Ed: Greece fuel tax hikes result in decreased revenue

Posted Jul 16, 2012 by Katerina Nikolas
A new report reveals that the Greek government policy of hiking the taxes on gasoline has resulted in a dramatic fall in fuel tax revenues.
It is hardly surprising that as the cost of gasoline in Greece is the second most expensive in Europe, Greek consumers struggle to fill the tank.
Ekathimerini reported Dimitris Tribonias, head of the Federation of Customs Officials, said following the introduction of a special fuel tax in 2010, tax revenues have continued to fall. He said "When compared with 2010, the fall in gasoline consumption is greater than 30 percent. There has been a similar fall in demand for heating fuel.”
The gasoline tax was expected to bring an additional 934 million euros per year for state coffers, but instead it only raised 100.9 million last year. It is likely to be half that in 2012. Looking back to 2004 the state received 907.8 million euros in fuel tax revenue even though tax levels were lower.
The policy of raising additional tax revenue through higher fuel tax is a dismal failure, not due to tax avoidance, but because people can no longer afford to use their cars as frequently, if at all. Indeed many, unable to afford the annual car tax, have been forced to hand their number plates back to the state. Despite this the Greek government has a new fuel tax hike that is enough to make the eyes water, planned for this coming winter.
When central heating oil goes on sale in October the price will be at least one third more than it was in October 2011, as a new plan to equalize the price of heating oil with petrol pump prices comes into effect. This could push the price of a litre of heating oil to around 1.5 euro, up from an average one euro last winter.
It hardly takes a economist to work out that the policy is doomed to fail and tax revenues will fall into practical non-existence from heating oil. Four years ago the cost of filling a 1,000 litre tank was around 700 euros. This winter the price will be at least 1,500. Four years ago the state coffers would benefit from the taxes the government levied on the heating oil. Yet, using this writer as an example, this winter the government has priced the oil too high to purchase, not a drop of oil will be bought and the government will fail to claim a single euro in tax revenue.
This will be replicated across the nation as citizens resign themselves to a cold winter or seek out alternate, cheaper forms of heating, turning to wood and bottled gas.
What madness rules Greece when a policy that has proven to fail is to be extended, condemning schoolchildren to icy classrooms and the elderly to the cold. Despite the soaring temperatures of a Greek summer, the temperatures plummet in winter. No doubt the politicians who determine Greek homes will remain barely heated this winter will continue to enjoy the warm temperatures political office affords them.