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As debate continues over the Government’s carbon tax package, this week The Tax Institute's Climate Change Committee finalised our initial thoughts on the tax design details of the announcement.  Ahead of the exposure draft of the legislation being released by the end of July, we have formalised our thoughts based on the detail provided in the Government’s documentation.  We have written to the Treasury officials involved in instructing the Parliamentary drafters of the legislation and have sent copies to the offices of the Treasurer, Assistant Treasurer and Minister for Climate Change.  There will be further opportunity for direct engagement with the Government on the tax design details once the draft legislation is released in the coming days.  Please feel free to be in touch via Tax Policy if you would like further details.  We will continue to keep members informed of developments.

This week The Tax Institute also contributed to the debate on tax reform with the publication in the Australian Financial Review of an opinion article about road user charges (see further below).  Excluding petrol from the carbon tax package doesn’t mean Australian motorists will be any happier with what governments tax them at the bowser and the disconnection with what is spent on the roads.

Federal fuel excise currently amounts to 38 cents in the litre.  The Government receives more than $13 billion from this, yet spends only a fraction of this on roads.  The Productivity Commission has been asked by the Government to conduct an inquiry into fuel excise arrangements, including an examination of the merits of a regime based explicitly on the carbon and energy content of fuels.  Reports suggest it will also examine whether road-user charges are needed to reduce congestion and discourage driving.  

In economic terms, road-user charges (or congestion taxes) impose a surcharge on users of a road transport network in periods of peak demand.  The Henry Tax Review suggested this was a way to directly fund transport improvements and new infrastructure projects, as well as enable tax cuts in other areas.  Motor vehicle stamp duties could be abolished and compulsory third party insurance could become more fairly priced.

So let’s have this discussion and much more at the Government’s Tax Forum later this year.  The Tax Institute will continue to ensure there is informed debate about tax reform in the lead up to the forum and beyond.  I’ll have more to say on this next week.

Kind regards

Robert Jeremenko FTIA