A French industry group takes the right approach to taxation of petroleum products. It publicly resists increases of oil taxes, which in France, as in much of Europe, are very high.
The trade group is Union Française des Industries Pétrolières (UFIP), whose delegate-general, Jean-Louis Schilansky, recently spoke out against a plan by the French government to raise the levy on automotive diesel fuel. Schilansky voiced that position even though the increase would accomplish, however perversely, an association goal: bringing diesel and gasoline taxes into balance. Noting that his group generally dislikes tax increases on oil products, the UFIP official said the government would achieve balance more constructively by lowering the gasoline tax, which is higher than the diesel levy (OGJ, Oct. 6, 2003, p. 7).
Bravo. It's nice to see oil industry representatives championing the interests of oil consumers. More such behavior would do wonders for a popularly demonized industry.
Standard presumption
Schilansky's comments deserve note for another reason: Their assertion of consumer interest challenged a standard presumption of environmental politics. French Prime Minister Jean-Pierre Raffarin plans to make a 2.5 centimes/l. tax increase on diesel fuel part of his budget proposal for 2004. Because some of the receipts will go to rail transport and theoretically reduce car travel, he calls the increase an ecological tax. The presumption is that this immunizes the proposal against opposition.
In politics, an ecological tax differs somehow from, say, a tax imposed just to siphon euros to a desperate government. But in economics, what Raffarin proposes, no matter what he calls it, is a 6% increase in a levy now accounting for 60% of what French motorists pay for diesel fuel. Because he describes the move as "ecological," though, good citizens are expected to pay up cheerfully—or ride the train.
Ecological branding like this is a powerful political tool. For example, it effectively subdues challenge to the urgent calls from Paris and other European capitals for taxation of carbon emissions as a precaution against global warming. What's urgent, of course, is not the climate's need of adjustment but these governments' needs for money.
Raffarin wouldn't be proposing to lift the sky-high diesel levy if his country's public accounts were in better shape than they are. France recently missed a deadline for lowering its public deficit to 3% of gross domestic product (GDP) to comply with the European Union's Stability and Growth Pact. The nation will violate the standard in 2004 for the third straight year. Embarrassed French officials, blaming their fiscal problems on a weak economy, respond by threatening to raise taxes.
But that well is dry. Writing in Wall Street Journal Europe recently, Cato Institute analyst Veronique de Rugy noted that the overall tax burden in France amounts to a whopping 45.5% of GDP. She reported an estimate of the French General Directorate of Taxation that 25,000 people leave the country every year because of taxation. It's safe to assume that these emigrants don't care what the government calls money it takes from them. And if economic stagnation explains the French government's fiscal woes, which it largely does, heaping taxes atop taxes can only make matters worse.
Not all taxes need to be resisted. Not all ecological taxes are bad. But taxation levels that approach one half of economic output stifle growth and encourage avoidance, including relocation. They also intensify resistance to further increases, which is why official Europe has become the world's breeding ground for politically unassailable ecological taxes.
Oil and gas companies and their trade associations should, like UFIP, recognize the natural urges of governments and resist all proposals for increases in taxation of their products. They should do so as a matter of principle—consumer protection—and not be bashful about it. And they should be prepared to defend that principle against others, including environmental values asserted as above dispute.
Who pays?
Industry detractors will howl that the companies are trying to avoid taxes. But that will create opportunities to teach the howlers that companies don't pay taxes; they only intermediate transfers of money to governments from individuals—consumers, employees, and shareholders.
Defending the interests of individuals is good politics. Defending the interests of customers, who never benefit from tax hikes, is good business.