“Root and Branch” Tax Review Must Include Fuel Tax


The Australian Automobile Association is pleased to see that the Rudd Government has picked up taxation reform as a key finding from the 2020 summit.

AAA Director of Research and Policy, John Metcalfe, said the AAA motoring clubs, representing more than 6.5 million motoring members, believe that any review of taxation must include fuel tax.

Mr Metcalfe said there are many shortcomings with current fuel tax arrangements. 

“Under the current excise structure, the tax rate on petrol is 38 cents per litre, which in reality means the tax on petrol (at current prices) is around six  times more than the tax on other goods and services – this is simply not fair,” he said.

“To use fuel tax as a simple revenue raising tool is no longer appropriate,” he added, pointing out that Transport Ministers in the UK and the US are already signalling a shift away from this mechanism towards a system of electronic road charging.

To address this shortcoming, Mr Metcalfe said the appropriate tax on fuel for revenue raising should be 10 per cent – the same applying to other goods and services.

“The petrol tax is also regressive and inequitable, placing higher burdens on low-income households and discriminating against those in regional areas.”

Mr Metcalfe said another shortcoming is that different fuels such as LPG and ethanol are taxed at different rates.  And he also noted that, under the heavy vehicle road charging regime, cars are overcharged compared with trucks.

“AAA believes that road users should pay for their costs of road use, but currently only 9 cents out of the 38cpl is allocated by the Commonwealth Government to road expenditure,” he said. 

“Reform of fuel taxation should involve replacing fuel tax with a road user charge which would have a number of components to cover road wear, environmental costs and costs associated with road crashes. The technology is available to do this.

“Charges would differ between trucks and cars and between urban and regional Australia, resulting in lower costs of motoring in rural and regional Australia.

“Reform would also require revenues collected from road user charges, and expenditure on roads to be linked.  With such a link in place, important price signals on the need for and location of new roads, and the use of roads, will emerge.

“There are big economic and social pay offs to Australia from fuel tax reform.”


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