Taxes on Fuel: UK and Australia Compared

There’s a bit of a hullabaloo going on here in Australia at the moment about tax on petrol which is due to rise on November 10th. When that date arrives I will have lived here in Australia for seven years, barring for just four days.

In all that time, I’ve never heard any mention of tax increases on petrol here in Australia until now. Petrol prices do jump around in Australia on a daily basis, back in February 2009 during just one week, prices varied from between about $1.08 and $1.22…

petrol-costsToday petrol prices are quite significantly higher…

petrol prices 2014You would be forgiven for thinking that the rise has been steady over the last seven years, but just two months ago petrol was on offer for $1.29 per litre. So petrol here doesn’t just jump around on a daily basis, it’s weekly and monthly as well.

Brits: Punished at the pump

Okay, let’s have a quick look at how this tax on petrol thing works in the UK. Well, that’s what I would have liked to have done but as with anything to do with tax, it’s complicated. In the UK though, every year the Chancellor can raise or lower the tax on petrol however he sees fit.

So if he wants to put one penny per litre on, he can. If he wants to take a penny per litre off, he can do that as well. Going back a little in history, during the Thatcher government, the Conservatives introduced the Fuel Price ‘escalator’.

By the time the escalator was abolished in 1999, fuel tax had risen by just over 14p per litre. That didn’t stop the rises though and it went up by 2p a litre in the 2000 budget. It went up again in the 2007 budget by 2p per litre and again by the same amount in December 2008.

budgetI could go on to mention that it went up by 1.84p per litre in April 2009 and again by 2p per litre in September 2009.

Then I would have to explain that the 2008 increase was to offset the reduction of VAT from 17.5 percent to 15 percent, although that didn’t matter too much because 1 January 2010 the VAT rate reverted back to 17.5 percent. So the 3p increase due the beginning of that year was reduced to 1p per litre although the rate went up by another 1p on 1 April of the same year.

Yes, April Fools’ Day.

Oh, it also went up a bit more in October of the same year and in January 2011 and, err, that’s the same year that VAT went up to 20 percent affecting petrol prices even further.

As I mentioned earlier though, the government could reduce tax as well is putting up, and that’s what they did in March 2011, reducing the rate by 1p per litre.

I told you it was complicated, and I got all this information from the quite comprehensive website on the subject called and you can read the full story over there.

Needless to say, tax on petrol in the UK is very high and in March of this year The Telegraph printed an article with the headline British fuel tax highest in Europe.

Australians: Beaten up at the bowser

The browser, in case any of you didn’t know, is the Australian word for the petrol pump. Let’s see if we can have a quick look, well a quicker look than we have just had for the UK would be nice, to see how tax works on fuel here in Australia.

  • In 1983, six monthly indexation, in line with CPI, was introduced.
  • In 2001 under the Howard government the tax rate was cut by 1.5 cents per litre and indexation of petrol tax rates abolished.
  • Since then, no tax increases.
  • The current government’s proposed tax increases starting in November are set to increase the prices at the rate of half of one percent every six months over the next four years.
  • I’m not quite sure what happens after those four years, but they say a week is a long time in politics, so not much point in thinking about that right now.

There you go, I think that’s it for Australia.

Not so complicated and certainly less taxing. In fact, according to a chart on the Australian Institute of Petroleum, Australia has the fourth lowest prices for petrol in all of the OECD countries, only Canada, Mexico and the United States have cheaper petrol…

Petrol Prices & Taxes in OECD Countries (June Quarter 2014)

OECD Fuel PricesThey quoted their source for the information as Australian Petroleum Statistics, Bureau of Resource & Energy Economics; I couldn’t find it, but you can read more over at


I’ve said many times on this blog that people in Australia complain about pretty much the same things as those in the UK do. Australians aren’t happy about the traffic, taxes, drunkenness, violence on the streets, crime, but all these things have to be looked at in comparison, especially by those thinking of moving to this country.

Australians are going nuts here about this proposed tax increase that is no longer being proposed and no longer has to pass through Senate, but has instead been pushed through via some kind of sneaky backdoor method. This could backfire on the government yet; if they don’t get this deal ratified over the next 12 months they could well end up having to give all the money back to the fuel companies.

Meanwhile, back in the UK, tax on petrol goes up pretty much whenever the government feels like it. So here in Australia, are we really so badly off with this move? The government say they will spend every cent on building new roads; we certainly need some of those.

Maybe they could call one of those new roads the Senate Bypass, just for a laugh?

Like most people, I hate tax hikes, but you won’t find me whingeing about this one too much. I’ve lived in the UK.

For more information about petrol prices, see:

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{ 6 comments… add one }
  • Kamma October 31, 2014, 5:39 pm |

    Gotta love how some people complain without comparison. XD Makes it even better to go there. “It’s outrageous how expensive this thing has become!” – “It’d cost twice as much where I’m from.” – “Point taken.”

    • BobinOz November 3, 2014, 4:12 pm |

      Yes, especially with this website, comparisons are very important. People looking to move to Australia want to know if they will be better or worse off generally speaking than they currently are wherever they live. The price of petrol is just part of the equation.

  • djmcbell October 30, 2014, 2:02 am |

    Here in the UK, I believe our petrol is currently about £1.26 per litre, though you can shop around a bit. It has come down recently – it was about £1.30-ish up until recently. But either way, that is mere pence.

    My parents report that petrol prices change in Australia, or at least their bit of it, depending on what day of the week it was. Strange one, that.

    I used to work in another city and decided to start driving in, but the petrol started costing too much so I started taking the train. Then train prices went up and I had no idea which was best, but thankfully managed to move to an office in walking distance. That doesn’t cost much, though I do miss the huge amount of exercise I used to get walking to the train station, then to the office, then doing the whole thing in reverse. I think I managed about 4 miles a day!

    A quick contrast – we were in America in 2012 and got lost when trying to drive somewhere. We eventually call in at a place to eat and ask directions, and the waitress says “at least you found us, pity about using all that gas” (their word for petrol). I tell her the prices we pay in the UK compared to US prices (£1.30 at the time per litre vs their US$3.50 I think per gallon, so at the time UK $8.40 per gallon vs US $3.50) and she said she’d never complain about it ever again! This was at a time when Americans were routinely on the news over there complaining about the price (“it costs me $60 to fill the tank on my 4×4!” was one of them, when it cost the same but with a £ sign to fill my little runabout), plus the TVs at petrol stations (yes, they have TVs at the gas pumps there – Americans can’t be away from their TVs) showing news reports about how people were concerned about high prices. You’d have thought the people you didn’t want to know about rising prices would be the ones filling up…

    Quick question – is petrol more or less affordable in Australia as in the UK, given exchange rates, average wages etc?

    • BobinOz October 31, 2014, 12:21 am |

      That’s sort of my point, in the US they don’t realise how good they’ve got it, petrol is really cheap there. Petrol is also much cheaper here in Australia than it is in the UK, we are currently paying about 85p a litre and on top of that, our wages are higher than those in the UK by around 30 percent.

      But of course, we still complain about petrol prices here and I’m sure everyone in the UK is complaining about it as well. They probably complain about it in Iran, and I think it’s about 8p a litre there 🙂

  • Christian October 29, 2014, 11:07 pm |

    Raising Fuel tax in this specific moment is not a bad idea from government ; thinking that the oil has heavily dropped from around $120 to $85 a barrel, and analysts predict will stay low for a long time due to improvements in the extraction technologies and economy slowdown of china. As a consequence it will offset the tax rise and people will continue paying almost same fuel prices that currently have assumed. Very clever from Tony’s team

    • BobinOz October 30, 2014, 11:54 pm |

      Petrol prices here jump around so much, it’ll be difficult to notice a difference as far as I can see. The rises are very minimal as well, I think it will cost the average motorist something like 25 cents a week extra. Who’s gonna notice that?

      On the other hand, we would all notice if they improve the Bruce Highway, for example. As I’ve said, I’m not complaining about this tax hike either. It probably is a sensible move.

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