The taxation of fuel and cigarettes is particularly hard to understand for the general public, but also for specialists. The price of these products includes specific charges that combine with traditional taxation at every stage.
From 141% to 554% of taxes and excise duties, well above the VAT rate of 20%
At the first level of analysis is the so-called “products tax.” The most known is the Value Added Tax (VAT). It includes four rates in mainland France: 2.1%, 5.5%, 10% or 20% (1). If treated as conventional products, fuels and cigarettes would be taxed at 20%.
To this must be added the excise duties. The best-known excise tax is the Domestic Energy Consumption Tax (TICPE). It accounts for between 101% and 122% of the price excluding other taxes, depending on whether diesel or super SP-95 is considered.
Tobacco Consumption Tax (DCT) accounts for between 370% and 445% of the pre-tax price of a pack of cigarettes, depending on whether it’s a “premium” or “bottom of the market” product.
These taxes are then combined. Fuels and cigarettes are subject to 20% VAT, but also VAT on specific excise duties. VAT is applied to other taxes, which is an anomaly as recently highlighted by a consumer association (2). This represents an additional cost ranging from 20 to 24% for fuels and 74% to 89% on cigarettes. The real VAT rates are therefore 40% to 44% for fuels and 94% to 109% for cigarettes.
When VAT and excise taxes are aggregated, there are extraordinary taxes ranging from 141% to 554% of sales prices excluding taxes.
Aggregated, these taxes totaled 60 billion euros in 2018. The TICPE generated 33 billion euros. The DCT on tobacco brought in 13 billion euros. VAT on these products and their excise duties generated 14 billion euros.
This represented 21% of the 284 billion euros in taxes on the various goods and services. However, fuels and tobacco accounted for 3.6% of household consumption, according to the latest data from INSEE, which illustrates the concentration of taxation on these specific products (4).
In this context, we can better understand the extreme sensitivity of consumers to tax increases on fuels and cigarettes. Increases in TICPE squeeze consumers, even when driven by environmental considerations (5), with fuels already taxed at between 141% and 166% of the sales price. The same applies to increases on cigarettes, even if they are motivated by public health arguments, since taxes already represent between 463% and 554% of the sales price excluding VAT (6).
These products are so taxed that some do not hesitate to present them as modern “gabelles [salt taxes]” (7). But experience shows that these concentrations of taxes on specific products are sensitive, even “inflammatory”, as illustrated by the analysis of Isaac William Martin and Navad Gabay on more than 475 episodes of tax contestation since the 1980s (8).
Taxation higher than that imposed on traditional economic players
Another level of analysis is taxation on the companies themselves. Fuels and cigarettes combine general taxes, with respect to taxes on production and profit sharing, and specific taxes. In addition, there are significant additional costs related to payments to the administrations of extractive countries for fuels. There are also additional costs at the marketing stage, with a Social Contribution tax on the turnover of authorized distributors and a levy on tobacconists for cigarettes (9), or the Energy Savings Certificates for fuel.
A combination of taxes and legal constraints representing between 197% and 642% of the value of goods excluding taxes
Aggregated, taxes and legal constraints represent between 197% and 230% of the production price excluding taxes according to the fuel type. As for cigarettes, they represent between 535% and 642% depending on the package.
1. EUROPEAN COMMISSION (2019), VAT rates applied in the Member States of the European Union, Situation at 1st January 2019, Taxud.c.1 (2019), page 54 https://ec.europa.eu/taxation_customs/sites /taxation/files/resources/documents/taxation/vat/how_vat_works/rates/vat_rates_en.pdf 2. UFC WHAT TO CHOOSE (2019), Flying fuel prices A petition against VAT on taxes, text published on 18/09 /2019, https://www.quechoisir.org/action-ufc-que-choisir-flying-from-the-price-of-fuels-a-petition-on-the-tva-on-tax-n70715/ 3. https://www.economie.gouv.fr/cedef/taux-tva-france-et-union-europeenne 4. INSEE (2019), Household consumption in 2017, series published on: 26/03/2019, https: //www.insee.fr/fr/statistiques/3676675?sommaire=3696937 5. See for example OPINIONWAY (2019), Ecoscope for Les Echos and Radio Classique, March 2019. “The vast majority of French people (77%) are opposed to its reinstatement in 2020. Nearly one in two French (47% ) does not even want this reinstatement at all … Even if the revenue generated by the increase in fuel taxes is allocated to the financing of the ecological transition, the French would be opposed to the resumption of these increases “https://www.opinion-way.com/en/poll-of-opinion/poll-published/OpinionWay-for-echos-and-radio-classical ecoscope-March-2019/viewdocument.html. 6. The Court of Auditors considers that the health cost of tobacco is subject to a “still uncertain assessment” between EUR 12 and 25 billion per year. COURT OF AUDITORS (2016), 2016 Annual Public Report, Volume II, page 332. 7. See for example FRÉMEAUX Philippe and MAURIN Louis (1996), The main taxes and household levies, Economic Alternatives N ° 141, 01/10/1996 (https://www.alternatives-economiques.fr/principaux-impots-prelevements-menages/00016671). 8. Sociologists observe that episodes of tax contestation related to excise taxes and duties on specific products such as gasoline or tobacco are much more common than would be suggested by the weight of these taxes in GDP. They represent more than 14% of the episodes of contestation, for a tax issue representing 4% of GDP in the 20 countries studied. These specific taxes arouse more hostility than VAT (present in 8% of tax disputes, for a tax issue of 6% of GDP) or social contributions (present in 2% of tax disputes, for a tax issue of 9% GDP). WILLIAM MARTIN Isaac and GABAY Nadav (2017), Tax Policy and Tax Protest in 20 Rich Democracies, 1980-2010, The British Journal of Sociology, 69 (3) August 2017, page 13. 9. See for example https://www.legifrance.gouv.fr/affichCode.do?idSectionTA=LEGISCTA000006179711&cidTexte=LEGITEXT000006069577