RACV backs global call for fuel tax switch

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http://www.theage.com.au/national/ra...605-1fnhi.html

RACV backs global call for fuel tax switch
Jason Dowling and Tim Colebatch
June 6, 2011

THE RACV has supported an initiative for governments to switch from taxing fuel at the pump to taxing motorists for every kilometre they drive.

Predicting a dramatic fall in fuel tax revenue as more fuel-efficient cars hit the road, the Organisation for Economic Co-operation and Development (OECD) told an International Transport Forum Summit in Germany last week that the change would replace lost revenue for governments and reduce road congestion.

The OECD's modelling on the impact of fuel-efficient vehicles, released at the summit, showed ''in at least some countries fuel consumption is likely to decline, possibly quite strongly, and even more so when stringent carbon abatement policies are introduced''.

Motorists could be charged using GPS satellite tracking, electronic toll-road tags or odometer readings under the proposal.

The RACV's general manager of public policy, Brian Negus, backed the move to kilometre-based charging to replace fuel taxes and fixed motoring costs such as registration.

''There should be as per the Ken Henry tax report, a serious consideration of road pricing. It should be on the basis that fuel excise is removed and a road pricing system comes in,'' he said. ''A move to road pricing in this context is inevitable and certainly is the right the way to go in the point of view of getting the right tax structure for motoring.''

The OECD's proposal comes as the Gillard government faces plummeting fuel tax revenue for a range of reasons. Petrol taxes in Australia have halved as a share of GDP since the Howard government ended indexation of fuel excises 10 years ago - and within four years, are expected to be down to a third of their former level.

The budget papers show that in 2000-01, the petrol excise raised $6.9 billion, or just under 1 per cent of Australia's GDP. But in the decade since, a combination of factors has slashed that take to just $5.9 billion.

By 2014-15, Treasury projects that the tax will raise just $5.3 billion or 0.3 per cent of GDP - leaving an $11 billion hole in the revenue needed to pay for health, education, welfare and other spending.

Despite the switch to diesel vehicles, the government's take from the diesel excise has also fallen as a share of GDP, from 0.7 per cent to 0.5 per cent in a decade.

In 14 years, the combined excise on both fuels is projected to fall from 1.7 per cent of GDP to just 0.8 per cent, leaving the government to find $15 billion of revenue elsewhere.

Two factors have combined to create the revenue hole:

■The Howard government's decision before the 2001 election to end indexation of fuel excises. This has since cut the excise by 25 per cent in real terms, saving motorists $4-$5 billion a year.

■Motorists are driving more fuel-efficient cars, and using public transport more, sending Australia's once-booming fuel consumption into reverse.

The Henry taxation review urged the government to restore indexation of fuel excises - but then prime minister Kevin Rudd and Treasurer Wayne Swan ruled it out immediately. In the longer term, the Henry review saw congestion charges in big cities removing the need for separate taxes on fuel. But it implied that these should be state taxes, not federal ones.

Jason Dowling travelled to the International Transport Forum summit as a guest of the OECD.