Study: E-car growth cuts London’s fuel tax revenues by a third

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The rapid growth in electric cars could cost the UK government billions of pounds of tax revenue in the coming years. Instead of a car share of 16.4 billion pounds (19.7 billion euros) in the fuel tax in 2019, the Treasury can only expect 11.4 billion pounds in 2028, according to a study published today by the RAC Foundation. That is almost a third less. The analysis expects the proportion of e-cars to continue to rise sharply.

The share of diesel vehicles in new registrations in Great Britain collapsed in 2021. In return, the share of e-cars skyrocketed, as figures from the industry association SMMT show. From 2030 onwards, combustion engines should no longer roll off the assembly line. The UK fuel tax is almost 58 pence per liter of gasoline or diesel fuel. That is the equivalent of a little more than the German energy tax rate of 65.45 cents per liter of petrol. For diesel fuel, a tax of 47.04 cents per liter is due in Germany.

According to the RAC Foundation, the losses of around five billion pounds are roughly equivalent to the amount that is spent annually on the operation, maintenance and expansion of motorways and main roads in the largest part of England. Treasury Secretary Rishi Sunak is facing a dilemma, said the organization’s head Steve Gooding. It is possible to increase taxes such as fuel and vehicle excise duty. But this will hit poorer drivers harder than wealthy ones. An alternative is a toll, but the introduction is extremely complicated.

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