The Howard government has rejected a new report recommending a substantial overhaul of fuel taxes, including the re-introduction of twice-yearly indexation of all fuel excise and customs duty.
The inquiry, chaired by David Trebeck, was announced by Prime Minister John Howard on March 1 last year and was asked to examine the existing structure of fuel taxation in Australia, including related rebates, subsidies and grants. It consulted consumers, business and environmental organisations, as well as state and federal government agencies.
The main recommendations were:
- that fuel be taxed on the basis of energy content and that this regime also apply to currently exempt fuels
- reintroduction of twice-yearly indexation of all fuel excise and customs duty
- replacing the existing Diesel Fuel Rebate Scheme (DFRS), Diesel and Alternative Fuels Grants Scheme (DAFGS) and excise concessions and remission systems with a Business Fuel Credit Scheme
- abolition of the Fuel Sales Grants Scheme and the Petroleum Products Freight Subsidy Scheme.
Notably, the proposal to tax all fuels based on their relative energy content would impose tax on previously unexcised fuels such as ethanol and LPG.
However, Treasurer Peter Costello says the government has decided against implementing the main recommendations, with many of the suggestions contrary to the government's election commitments.
"The government will not reintroduce fuel excise indexation. The indexation of fuel excise was abolished in March 2001 in response to community concerns about high petrol prices and the government will not revisiting this issue," he says.
And the replacement of existing concession schemes with a Business Fuel Credit Scheme for on and off-road users, he notes, would break an agreement with the Democrats to restrict full rebates to certain classes of on and off-road use.
Costello points out the Energy Grants (Credits) Scheme, which will replace the existing diesel grants schemes from July 1 next year, will provide "active encouragement" for the move to the use of cleaner fuels, while at the same time maintaining entitlements equivalent to those under existing schemes.
The proposal to discontinue the Fuel Sales Grants Scheme and the Petroleum Products Freight Subsidy Scheme, he adds, would affect regional and remote consumers.
"Therefore, the government as decided to maintain the (schemes)," Costello says.
The government will, however, "carefully examine" the inquiry's recommendation for a production subsidy for ultra-low-sulphur diesel (ULSD), to be funded by an increase in all excise on diesel.
"The government has already made a commitment to apply an excise differential to encourage the early introduction of ULSD.
"This excise differential will consistent of an additional excise on regular diesel of one cent per litre from 1 January 2003, rising to two cents per litre for 2004 and 2005.
"A production subsidy would be aimed at easing the administrative requirements of applying DFRS and DAFGS to two differently taxed types of diesel," he says.
To read the report in full,
click here.