BIC call to defer rego, excise hikes

NTC's proposed increases in rego charges and diesel excise for buses and coaches should be deferred, according to Bus Industry Confederation

BIC call to defer rego, excise hikes
BIC calls on NTC to defer rego, diesel excise hikes

April 21, 2010

The National Transport Commission’s (NTC) proposed increases in registration charges and the diesel excise for buses and coaches should be deferred until a comprehensive road pricing regime can be implemented, according to the Bus Industry Confederation (BIC).

The NTC has recently proposed that bus and coach registration charges should rise by more than 4 percent and that the fuel excise should increase from 21.7 cents per litre (c/l) to 22.6c/l, effective July 1.

The Commission argues that these increases result from applying its cost-recovery principles to a 10.7 percent increase in road expenditure in 2009/10.

In a letter sent to federal, state and territory transport ministers, the BIC’s Executive Director Michael Apps argues the current PAYGO system is fundamentally flawed and calls for the proposed increases to be deferred until a "comprehensive road pricing regime" can be implemented.

Like sections of the trucking industry, Apps says the use of average road expenditure figures produces an inequitable outcome where all operators pay the same registration fee whether they travel low or high kilometres.

The use of the average also fails to take account of the huge disparity in expenditure between urban and rural roads, he adds.

According to the NTC’s own figures, governments spent more than $2 billion extra on urban arterial roads than rural arterial roads between the 2002-03 and 2008-09 financial years.

More fundamentally, though, Apps points out that the road user charging system "only explicitly charges heavy vehicles and only for road damage costs attributable to their road use". No other external costs are directly priced into road use, in particular congestion costs, which are about $10billion annually and rising quickly, he contends.

Apps says that the BIC accepts the general principle that road damage costs should be recovered from all road users and that, under the PAYGO approach, increasing expenditure will lead to higher charges.

"The BIC does not, however, accept that it is efficient resource allocation to apply this approach while completely ignoring all other external costs of road use," he adds.

"There is widespread agreement amongst governments and the community that, especially in our cities, public transport needs to increase its mode share relative to the private car. This is because of the widely recognised external costs of car use, which include congestion costs, high and rising greenhouse gas emissions, accident costs, the social exclusion risks that are faced by many transport-disadvantaged people in a highly car-oriented society, and the obesity costs associated with high levels of car dependence.

"The changes to charges proposed by the NTC will make buses and coaches relatively more expensive compared to the private car, which can only reduce the market share of buses and coaches. This is exactly the opposite policy outcome to that which should be being pursued at present.

"Only in the event of a comprehensively reformed road pricing system could the increase in road damage costs be unambiguously defended as contributing to improved economic efficiency."

"Equally, only in that comprehensive reform context could the adverse distributional consequences of higher bus and coach costs be defended, since that comprehensive reform program would deliver a substantial revenue stream that could be used to improve travel opportunities for transport disadvantaged people."

Apps concedes the NTC’s proposals are a "logical outcome" of the legislation under which the Commission operates.

But he adds: "The narrow frame of reference of that charging legislation is now producing dysfunctional outcomes, which are the reverse of the behavioural incentives that should be pursued."

In the lead up to the introduction of a new road-pricing regime the BIC proposes a redefinition of the formula used to calculate road user charges for buses and coaches.

Under the current system the bus industry is placed in a general classification of heavy vehicles along with trucks.

The BIC notes that the policy of tying the user charge to the diesel fuel rebate means that as the road user charge component of fuel excise increases, the diesel fuel rebate decreases by the same amount.

As a result, the diesel fuel rebate has effectively been decreased by 1.4 cents since late 2007 and will fall further if the NTC’s proposal is accepted, thereby increasing the cost of public transport and passenger services.

"The BIC believes the taxation review should consider a revision of the calculation mechanism of the heavy vehicle road user charge for buses on the basis of infrastructure savings and the safety and environmental benefits that buses bring," the BIC suggests in its submission to the tax review recently undertaken by Treasury Secretary Ken Henry.

Additionally, the Confederation’s submission argues for the introduction of tax incentives to encourage public transport use for the purpose of travelling to and from work; the provision of FBT benefits for public transport travel by employees; and the allocation of GST revenue collected from expenditure related to public transport into a public transport fund.

In its submission to the tax review, the Confederation proposes a radical change to the way road transport is priced, to ensure maximum value is achieved from use of the existing infrastructure base and that improved pricing signals are provided for system enhancements.

Central to the BIC’s proposal is the introduction of a comprehensive "externality based" road pricing regime to replace the current fuel excise charges and associated heavy vehicle charging systems.

Such a regime would comprise: a charge on fuel to cover carbon costs as well as the costs of road construction and maintenance attributable to lighter vehicles; tonne-kilometre charges for additional road damage attributable to heavy vehicles; and differential vehicle registration charges to levy the more polluting vehicles for their health costs.

Perhaps most controversially, the BIC argued for a GPS-based congestion pricing scheme to make users accountable for the congestion costs attributable to their road use, by time and location.

Alternatively, the fuel-based and registration-based charges could be included as elements of a broader set of vehicle kilometre charges within a GPS-based charging system, it notes in its submission to the tax review.

"A comprehensive road pricing system will result in a more rational set of travel choices, reduced demand for new infrastructure, and achievement of significant economic benefits through lower congestion costs, as well as cutting other external costs of road use," the BIC writes.

"An essential requirement for the success of such a scheme is the transparent and accountable hypothecation of the revenue earned from these charges into improved transport systems and services. This removes the public perception that the charges are simply a tax on consumers."

The NTC says it will begin a four-week consultation with the industry until April 23 to get operator feedback. A final recommendation will be made to governments on April 30.

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