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Taxation Institute calls for a full review of petrol taxes

Publication date: 29 May 08 | Source: THE TAX INSTITUTE

Australia’s premier professional tax body, the Taxation Institute of Australia, today proposed that the Government consider restoring the pre-2000 model for taxing petrol in order to give relief to working families and to tie state governments to an agreed revenue take from tax on fuel.

In response to the growing debate around spiraling fuel costs and calls to cut the existing “tax on tax” for fuel, President of the Taxation Institute, Sue Williamson, said the real issue was around the current model for taxing petrol.

“While we saw a cap on Fuel Excise introduced with the introduction of GST, the model is exposed to tax creep through the application of GST on the cost of fuel,” Ms Williamson said.

“As a result, every one cent (1c) increase in the bowser price means that working families will fork out an additional $17.3 million per year in taxes to the state governments. If fuel prices reach $2.00 as forecast, this will mean an extra $865 million per year paid in GST for the benefit of States.”

Bringing it down to an individual level, the current taxation regime means that of the $69.50 to fill a vehicle with 50 litres at $1.39, the excise tax is $19 with GST component being $6.30. With the price per litre increasing to $1.60 ($80 in total), the excise tax remains at $19, but the GST increases to $7.20.

“One solution could be for the restoration of an Excise Tax only, which includes a reasonable level for allocation to the state governments,” Ms Williamson said.

“This should quell the concerns aired by the state governments as they will continue to receive tax from fuel sales, but without the tax creep, and cut fuel prices.”

Ms Williamson said it was encouraging to see the Government had committed to referring the issue of GST on fuel tax to the Tax Review.

“We do hope the Tax Review will investigate alternate tax measures for fuel and broader goods and services as opposed to simply tinkering with the existing regime,” she said.

“However, we also question whether it is viable to wait until the Tax Review reports back before anything is done in regards to tax on fuel, or whether the Government can do something meaningful now to relieve the pressure, given the windfall GST receipts being collected from rising petrol prices.”

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About the Taxation Institute of Australia: The Taxation Institute is Australia’s largest and most diverse body of tax professionals working together to improve the tax system and the delivery of tax services through education, sharing of information and consultation.

Media Contact:

Sue Williamson, President – Taxation Institute of Australia on 0411 646 783

Peter Laidlaw, Lighthouse Communications Group on 0419 210 306