The 2006 OFT report identified a level of acceptable differential between Isle of Man and UK independent dealer prices which was to be monitored with a trigger point of 5 ppl or higher to be used to launch a further price investigation under the Fair Trading Act. One of the respondents and Mr Juan Watterson MHK gave their views on this level of
differential and how the Office had monitored it.
John Hammersley ―About a year ago the OFT released a statement saying that it would not investigate petrol retailers on the Island as long as the average price charged on the Island was no more that 5p per litre dearer than the average petrol price in the UK. However, I believe that this left a subtle yet huge loophole
for the Island retailers to exploit…the average UK petrol price is not what the average UK person pays. This is because the average person is within easy reach of filling station in a urban location….The UK figures are skewed because there are as many filling stations in remote locates who charge far more through lack of competition and transport costs. The IOM by contrast is a small geographic area with a fixed overhead of importing petrol and only a minimum on island additional cost for distribution, due to the close proximity, in comparison to the UK, of all locations to Douglas.‖
Mr J Watterson MHK ―I have used as my starting point the initial investigation of 30th October 2006 (―the 2006 Report‖) as a starting point and subsequent changes in assumptions and communications from constituents since that date… Recommendation 7 supported the view that a 3ppl differential could be justified in the Isle of Man Market, with a 5ppl differential leading to an OFT inquiry under s. 19 of the Fair Trading Act. The figures I received….on 2nd March 2009 seem to show significant trends above this level, with a cumulative differential of 4.8ppl for unleaded, and 33.9ppl for diesel. This cumulative differential should remove any arguments for time lags and represent a pure contribution to profit. This
cumulative contribution has been consistently high since September 2008 for diesel. For unleaded petrol it has been more inconsistent, but has been
consistently positive since October 2008. For these reasons, based on the same assumptions as set out in the 2006 Report, the price of road fuel has been higher than can be justified on the Island.‖
The Board of the OFT shared these concerns regarding the level of price differentials between the UK and Isle of Man when they determined in October 2008 to carry out this investigation. The breaching of the figure set as an acceptable level of price differential between UK and Isle of Man prices also was a factor.
8.2.9 Taxation issues
Three respondents raised issues in relation to the size and nature of duty and taxation levied on road fuels and company taxation.
Gareth Colquitt ―The main problem is of course with the ludicrous tax as this accounts for some 70% of the cost. This needs to be reduced immediately as we already pay enough road tax to use manx country lanes.‖
Mark Clarke ―The U.K. fuel price has always been higher than Europe due to excessive taxation. Is it not time this situation is corrected? reduced transport costs help everybody.‖
Colin Johnson ―There is however, one major consideration that the OFT have to take into account in this investigation and that is the tax status of the oil
distribution companies. Under Island legislation Island companies do not pay Income Tax on their profits. It is my understanding that that is not the case in the United Kingdom where companies have to pay 21% if profits are less than
£1.5million and 28% if over. Hence the UK oil companies will, I understand, be subject to that income tax tariff. The Island companies are not. Consequently
would it not be prudent of the Island oil distributors to pass to Island consumers the benefit of the tax anomaly that appears to exist between off and on Island.‖ The Isle of Man is committed to charging the same level of tax and duty on road fuel as is charged in the UK. The Customs and Excise Agreement, which is backed by both UK and Manx legislation, means that for VAT, customs and most (but not all) excise duty purposes the two territories are treated as if one. The impact of company taxation on the companies involved in the investigation was a factor considered and taken into account in the production of Chapter 6 which details a full profitability analysis of the companies.
8.2.10 Miscellaneous
The remaining comments made by respondents do not strictly fit under any of the broad categories above.
Hon P Gawne MHK ―I have no specific evidence of artificially high liquid fuel prices on the Isle of Man, though there is a collective opinion of many of my constituents that this is the case.‖
Jason Callister ―I think £400 a month on fuel is self explanatory. When I‘m paid £1300 a month, after tax.‖
Joanne McGlynn ―The main thing I am concerned of is if the fuel is
contaminated. I have had problems when I have filled my car with fuel from certain filling stations and had major problems as there has been water missed in with it‖
If anybody has concerns about contaminated liquid fuels then they should advise the OFT as soon as possible. The OFT will test for the same and take appropriate action and advise accordingly.