If you live in Switzerland, filling up your car across the border can save you a packet, depending on the country and fuel type. While savings sometimes come from lower fuel taxes, much of them comes from the lower underlying prices foreign fuel retailers charge. And it is difficult to argue that you’re paying a premium for a higher quality product.
Switzerland – from fuel exporter to fuel importer
In 2008, when with one exception, both diesel and petrol were cheaper in Switzerland, drivers from neighbouring countries looking for savings, bought between 450 and 500 million litres of petrol and 75 million litres of diesel in Switzerland, estimates the Swiss Petroleum Union.
Since then the flow has reversed. By the end of 2015, net cross-border petrol sales had shrunk to almost zero, while Swiss diesel vehicle drivers bought around 90 million litres of diesel in neighbouring nations. A key driver behind this reversal was the big jump in the Swiss franc when the Swiss National Bank dropped its currency cap in early 2015. While the fuel prices retailers had to pay in Swiss franc terms declined after the currency appreciated, other costs borne by Swiss retailers and possibly margins, proved less flexible, driving up Swiss pump prices relative to those abroad.
Research done by RTS suggests there is a lack of competition among fuel retailers in Switzerland. Reporters surveyed Swiss cantons asking retailers whether they set their prices in line with the competition. In 6 of 7 cantons surveyed they found that more than half did. Walter Stoffel, vice president of the competition commission (Comco) at the time supported this view when he said “There is evidence that supports our belief that competition is not entirely free, especially the simultaneous and sometimes identical price rises seen across a portion of the market”. Geneva and Valais seemed to have the least competitive markets. 80% of retailers in Geneva set prices at the same level as their direct competitors. In Valais the same figure was 92%.
In 2008, diesel was cheaper in Switzerland, with the exception of Austria where it was slightly more expensive. Now diesel is generally cheaper in all neighbouring countries.
In 2008, Swiss petrol was around 15 to 48 Swiss cents less a litre than over the border. By January 2016 most of these positive differences had disappeared. Only Italy had significantly pricier petrol, while petrol in Austria was cheaper than in Switzerland.
Le News took the January 2016 european pump prices published by Swiss customs, and broke them down into tax, and the amount retailers charge for the underlying product.
The tax difference
Swiss taxes on petrol are lower than those in France, Germany and Italy. Only Austria has lower petrol taxes. Swiss taxes on diesel swing the other way. Switzerland charges more per litre than all of its neighbours, except Italy.
The underlying product price difference
Excluding taxes, Swiss fuel retailers charge significantly more for the underlying product across the board, particularly when compared to France, the cheapest. French fuel retailers charge nearly 32% less for diesel before tax, than Swiss ones, and around 15% less for petrol. German retailers also manage to keep the underlying price 22% lower for diesel and 12% lower for petrol.
In Italy, where diesel taxes were 5 euro cents higher a litre, diesel was still 4 cents cheaper because Italian retailers were charging 9 cents less per litre for the underlying product.
Austria, the clear winner overall, offered savings on tax, and the underlying price retailers charge for both diesel and petrol.
The risk of generalising
Cross-border price comparisons vary significantly by retailer, particularly when looking across the border to France, where supermarkets typically offer the best prices often by a wide margin. Motorway stops in France and Italy charge significant price premiums. In addition, the exchange rate is a moving target, and many banks and credit card companies charge large transaction fees hidden in exchange rates.
Where the tax money goes
In 2015, the Swiss government collected motoring fuel tax of CHF 4.7 billion. CHF 3.3 billion of this was used to cover costs and investments related to roads and air traffic, while the rest went into the federal tax pot. It is estimated that tank tourism (Tanktourismus in German) has reduced the tax take by a total of CHF 1 billion, according the Swiss Petroleum Union.
On 15 March 2016, the federal states council decided to add an additional 4 cents a litre to Swiss fuel tax to fund FORTA, a fund for road infrastructure improvements. Soon the National Council will look at the proposal and decide whether to approve it. Approving the increase might drain more form than tank than it puts in if it encourages more drivers to start heading across the border to fill up.