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What is a Diesel Fuel Tax?

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  • Written By: Jason C. Chavis
  • Edited By: Bronwyn Harris
  • Last Modified Date: 07 November 2016
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A diesel fuel tax is a type of monetary surcharge placed on the sale of diesel fuel. This is generally used to generate income for a government, either at the state or federal level in the majority of countries around the world. It most readily involves a lower tax rate than traditional gasoline since diesel is used heavily with farm vehicles, large transportation and home heating.

By imposing a motor fuel tax on the population, governments can utilize the money generated from the sale of diesel as a relatively secure form of revenue. As part of a long-term energy policy, users generally change their habits in order to compensate for the higher cost of the fuel. This means that every adjustment upwards of a diesel fuel tax will ultimately result in a downward rate of usage, causing an overall loss of revenue. Due to this reasoning, many countries choose to maintain the fuel taxes at a relatively steady rate.

Additionally, some nations, such as the United Kingdom and other Western European countries, have adopted the policy of utilizing gas tax rates as a form of conservation. By increasing the cost of taxation, the use will go down. This has the overall benefit of supporting environmental policies through economic incentives rather than on a voluntary basis. Studies conducted by the European Union have shown that adding a diesel fuel tax reduces the rate of consumption at a faster pace than a socially responsible push.

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Diesel fuel tax policy has had a dramatic change in the type of vehicles driven by the average consumer, especially in the Americas and Europe. Since the dawn of the automobile, many manufacturers used diesel as a primary fuel to power internal combustion engines. During the early part of the 20th century, nations began to place a motor fuel tax on the consumption of this particular petroleum product to raise revenue. However, over the years, many car manufacturers changed to regular gasoline engines. By the early 21st century, the vast majority of cars used gasoline rather than diesel, despite the fact that taxes were levied on this fuel as well.

One suggestion from environmental agencies involves the dissolution of the diesel fuel tax and the implementation of a carbon tax on the fuel itself. This would mean that instead of taxing the volume of material in the diesel fuel itself, the amount of emission would be taxed. Diesel fuel has the bonus of possibly being manufactured from materials with less of a carbon footprint, such as bio-diesel. This would dramatically impact the level of taxation on the fuel worldwide.

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