Greedy Corporations or Out of Control Government?

After my recent discussion about fuel duty I was thinking about how we are often told how “Greedy Corporations” remove money from the economy and are responsible for high wages I thought I would look at it through a practical example. Working for an Oil company I thought I would look at how much of £100 paid to me by my employer that was then returned to them by purchasing their petrol. Out of this £100 how much would end up as company profit and how much would end up with the Government.

The first government slice (actually three slices) come before I have even received the money.

Tax Type	Tax Rate	Payable on	Tax	Remaining
Employer National Insurance	0.138	£100	£14	£86
Income Tax	0.4	£100	£40	£46
Employee National Insurance	0.12	£100	£12	£34

So before even receiving the money the £100 is reduced down to £34 (Which is enough to provide me with 28.33 Litres of Unleaded. This gives the Government their next two slices.

Fuel Duty	£0.58	28.3l	£16.40	£17.60
VAT	0.2	£34	£6.80	£10.80

So with over half of the money being taken in direct taxation again we have the actual money that is spent on the product cost, obviously as there have been taxes all along the process part of this cost is made up of the taxes incurred on the product pipeline, unfortunately there are no direct figures available but based on the figures of produced by PWC and available here I have worked out that the supply taxation costs is about 18p per litre. (this includes - Petroleum Reserve Tax, Employee Taxes, Supply Chain Tax, property Tax and Environmental Taxes)

Supply Line Taxation

£0.18

28.3l

£5.09

£5.71

So from the £100 my company wanted to pay me the government have already taken 94% so there is nothing else for them to do but to tax what little they have so far failed to take through corporation tax – including the supplemental levy payable by Oil and Gas companies.

Corporation Tax

0.3

£5.71

£1.71

£3.99

 This gives the Government 96% of the money and the “Greedy Corporation” 4%

And as if the government removing 96% of the money from the economy already if this profit is paid back to shareholders they will take up to an additional 37.5% and should that Shareholder go on to spend the money they will take another healthy 20% in VAT!

 

What is the Tax rate on a Litre of Fuel?

In a recent conversation I was talking to a friend about the levels of taxation on a litre of fuel (I am just that much fun) We realised that although we both knew that we were taxed too much neither of us knew what the actual rate of tax was so I decided to look into it.

The tax on fuel that is often quoted is about 65% and is calculated as

Cost of a Litre of Fuel = £1.29 Tax on fuel £0.84 (£0.58 Fuel Duty and £0.26 VAT) this gives us 0.84/1.29 = 65%

Now this is a pretty high percentage to pay in tax especially in times that people are struggling to get into work. However this is the percentage of what you pay that is tax, rather than the tax rate on the product itself. To find this we need to find the net product cost which in the simplest form you can calculate as 

Cost – Tax to get the net product cost so in this case it is £1.29 - £0.84 = £0.45 so this is the net product cost and produces an actual tax rate of 0.84/0.45 = 187%

And this isn't even taking into account the percentage of the net product cost that is actually made up through taxation (Tax on Staff Costs, Business Rates, Production Taxes etc...) I may look at trying to add these on but unfortunately the information isn't easy to find out as I think if we ever found out the true cost of taxation on our lives the whole house of cards may just come down.  

Who is this a picture of

Not normally what I blog about but someone at my work keeps putting pictures of this guy on my desk. Apparently I should know who it is but I am really bad at recognising people. If anyone recognises him please leave a comment. If I ask who it is then he wins.