News

Motoring Clubs combine to Call for Freeze and Reform of Fuel Tax

30.10.2000

In a joint statement released in all Australian capitals today, the nation’s motoring clubs have called for the reform of the fuel tax system. They have also announced plans to step up their campaign for a freeze on fuel excise in February on behalf of their 6.4 million members.

According to AAA Executive Director, Lauchlan McIntosh, the freeze is needed to compensate for the 1.5 cent increase in Commonwealth excise when the GST came in, the inflationary effect of the GST on the indexation increase in February and the tax-on-a-tax impact of the GST on excise. He said the Government had a moral obligation to motorists and would not regain their faith until this obligation was met.

"Even the latest CPI figures for the September quarter highlight just how unfairly motorists have been treated. While the overall CPI increase for the quarter was 3.7 percent, petrol rose by 10.4 percent or 8.3 cents. Of that increase, 37% or 3 cents per litre, was as a direct result of increased tax."

Mr. McIntosh revealed that the clubs had also jointly called on both the Federal Government and the Opposition to give a commitment to reform the fuel tax system which, he said, was regressive, outdated and out of step with the nation’s new tax system.

"There needs to be a bipartisan approach to reforming the fuel tax system and the Australian Automobile Association, on behalf of all Australian clubs, has written to both the Prime Minister and the Opposition Leader seeking a commitment to reform.

"The clubs have consistently argued that the petrol excise and indexation system should be abolished and replaced by a system that recognises the real cost of road use and charges motorists accordingly. This would not mean additional cost for road users. It is clear from independent research that motorists more than pay their way.

"We have suggested to both the Prime Minister and the Opposition Leader that the most appropriate way to progress genuine reform in road funding and charging would be through a reference to a Joint Parliamentary Committee. We have suggested the reference be designed in such a way as to ensure the inquiry serves as an ideas forum which would allow the various stake-holders to put forward their views and proposals.

"The combined clubs are happy to work constructively with all political parties to develop a fairer system that provides road users with value for their money." Mr. McIntosh said.

 

Attachment

WHY FREEZE EXCISE

Undertakings Given to Motorists:

The Government gave a number of clear undertakings to motorists that petrol prices would not rise as a result of the GST. The Government also gave a clear undertaking about the introduction of the GST. To quote Deputy Prime Minister, John Anderson, in Parliament on 25 November 1999 –

"We have made it plain that when the new fuel tax arrangements come into place we will reduce the cost of excise on fuel by an amount equivalent to the GST."

The Government identified 8.2 cents as the ‘amount equivalent’ but instead choose to reduce excise by 6.7 cents. The money was supposed to come from oil companies but didn’t, leaving motorists to pay the extra 1.5 cents for fuel.

Increased Tax:

The ACCC has estimated that petrol rose in price by an average of 8.3 cents per litre during the first three months of the GST. This has been confirmed by the Australian Bureau of Statistics in their September CPI report. Importantly, 3-cents* of the increase, or 37%, was as a direct result of higher taxes (both GST and excise).

To explain that further, on the 30th of June, motorists were paying a total of 44.2 cents per litre in tax. By 30th August they were paying 47.2 cents tax (excise & GST). If the same tax applied today as was the case on 30 June, petrol would be 3-cents per litre cheaper.

The GST Spike:

The GST has caused a one-off inflationary spike which will be passed on to motorists when fuel excise is adjusted to reflect the CPI in February. As a result, petrol tax will increase by at least 2-cents per litre, part of that increase as a direct result of the GST (and contrary to government undertakings).

It is fair to ask why the Government won’t treat petrol the same as other essentials like electricity and gas. In both cases increases will be discounted by the GST spike.

Summary:

Motorists have not been given a fair go. Petrol prices have risen as a result of the introduction of the GST as confirmed in the recent ACCC and ABS reports. Petrol prices will rise further in February unless the Government freezes excise.

If excise is not frozen in February, motorists will be paying over 50 cents per litre in tax, a jump from 44.2 cents in June 2000. And that increase since June will net the Government between $1.7billion and $2 billion dollars extra per annum from motorists.

(* Based on a retail price of $1.00 per litre)

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