News

Study Highlights Urgent Need for Increased Road Funding

29.2.2000

The Executive Director of the Australian Automobile Association, Lauchlan McIntosh, has welcomed the release of a study, Taxing Cars, by the Australian Tax Research Foundation.

The report, based on 1994/95 figures, identifies the cost of road use including costs associated with accidents, congestion and noise and concludes that, at that time, there was little excess tax on vehicle ownership and use in Australia.

Mr. McIntosh said that while that may have been the case in 1994/95, fuel excise had increased by a staggering 16 per cent since then due to the Commonwealth's policy of indexing fuel excise to the CPI.

"Indexation of excise is being used purely as a revenue raising device and provides no benefit to road users. Since the current government came to power in 1996, indexation of fuel has netted the Commonwealth an extra $417 million without a cent of it being returned to roads. Over the past decade road funding has been stable. Over the same period roads have continued to deteriorate and motorists have paid more and more in fuel excise," Mr. McIntosh said.

"The Foundation's study shows that in 1994/95 there was a reasonable balance between what motorists paid and what they received. That is clearly no longer the case. Another 1994 AAA report, by the Allen Consulting Group, revealed a serious backlog of road needs. The Government's own Neville Report also highlighted this backlog. Nothing has been done to address the backlog and so the situation is now much worse than it was in 1994.

"The AAA believes governments, both state and federal, need to urgently re-invest in our roads and highways to redress the balance that has been lost since 1994/95. The Prime Minister has an excellent opportunity to announce a major ten-year road program in the next budget under his 'renewal of infrastructure' plans and we would strongly urge him to do so.

"AAA is also anxious that the Commonwealth address the question of double taxation on petrol under the GST. The GST will apply to excise, (a tax on a tax), despite assurances that this would not happen. It will force petrol prices up by more than the CPI rate and will provide the states with a GST bonus of tens of millions of dollars over the next few years at the expense of motorists.* We believe this is wrong, particularly if there is no compensating increase in road funding," Mr. McIntosh said

 

*NB – Example of double taxation effect: Say the price of petrol post GST is 88 cents per litre (an 80-cent base plus 8 cents GST). Suppose the CPI for the first year after the GST introduction adds 2 cents a litre to excise. The base price rises to 82 cents plus 10% GST – 8.2 cents. The new price will be 90.2 cents per litre, 0.2 of a cent above the CPI. 0.2 of a cent a litre will net the states an extra $37 million per year.

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