Monday, May 26, 2008

Now Rudd's in on it. Less gas tax.

Spare us. The Opposition Leader Brendan Nelson is actually in a powerful place when he can get the Prime Minister to match him no matter how stupid his idea is. What hope is there for even mildly-courageous decisions under Rudd?

The Rudd government has held open the prospect of axing the GST it charges on its fuel excise – the so-called “tax on a tax” that adds 3.8 cents per litre to the price of petrol.

Government sources said there was a chance the extra tax would be gone by the end of the year.

The Families Minister Jenny Macklin yesterday confirmed that the tax inquiry to be chaired by the head of the Treasury Ken Henry would examine exempting the fuel excise from the Goods and Service Tax...

“That is one of the issues that we will address in this major tax inquiry that the Treasurer has announced,” she said.

“It will look at that issue and a wide range of other critical matters that haven't been looked at for such a long time."

The inquiry is not due to deliver its final report until the end of next year, but has been asked to report in stages - meaning that the GST could come off the fuel excise later this year.

In setting up the inquiry the government promised to respond “in a timely way” to the Review’s recommendations as they were released.

The Tax Review will be made up of the head of the Treasury Dr Ken Henry, a Canberra tax specialist Greg Smith of the Australian Catholic University, the head of the Families, Housing, Community Services and Indigenous Affairs Department Dr Jeff Harmer, Heather Ridout of the Australian Industry Group and Professor John Piggot from the University of New South Wales.

It will be begin work in July after receiving a discussion paper prepared by the Treasury.

The announcement comes amid skyrocketing petrol prices which have hit 162.9c a litre in Sydney and 159.9c in Canberra.

The 3.8 cents a litre tax cut would go some way to meeting the Coalition’s post-Budget promise of a 5 cents a litre cut.

While that promise was attacked by economists and energy experts as irresponsible, the removal of the “tax on a tax” could be presented as justifiable in terms of taxation theory and flowing from an independent review of the tax system.

The new Petrol Price Commissioner and the planned FuelWatch scheme would be used to make sure that the 3.8 cents a litre tax cut was fully passed on at the pump.

But any resulting joy experienced by motorists would be short-lived.

The price of oil has climbed through $US130 and is expected to pass through $US150 within weeks. When that happens the Australian retail petrol price is expected to climb to more than $2 a litre.

As well the emissions trading rules to be adopted by the government later this year have the potential to push up the price further. A discussion paper released by the Government’s Garnaut Climate Change Review in March recommended that the emissions trading rules apply to fuels used for transport.

Any decision to remove the Goods and Services Tax from the fuel excise would change the nature of the GST, which was intended to be comprehensive, applying to all financial transactions and goods and services with a very limited number of exemptions.

The states and territories would apply for compensation for the GST revenue lost, which would exceed $1 billion.

The Opposition Senate Leader Nick Minchin yesterday welcomed the government’s move saying that the fuel tax cut was “a great Liberal policy that Mr Rudd should take up”.

He held open the prospect of blocking the government’s proposed FuelWatch scheme in the Senate saying the Coalition had “not made a decision” on whether to let it pass.

“All of the evidence is that Western Australia’s fuel watch scheme hasn't made a difference. We don't think that watching prices go up makes a difference. We think that the government should adopt our policy of cutting the fuel excise by 5 cents a litre.”

2 comments:

Anonymous said...

Good post Peter. Rudd seems to be rather foolish and gutless giving in to this silly policy idea. Hope that's not a sign of things to come from him.

Al

LETTERS said...

Letter to Editor May 28, 2008

I am absolutely staggered at the Federal Opposition's reply to the budget.

I find it amazing it would base its whole budget strategy on a lousy 5c off the price of petrol (which it refused to do itself).

And it claims to be a good economic manager.

What is even more staggering is the amount of time and energy our so-called journalists and radio and TV correspondents spend on this issue, without bringing the Opposition to account for its stupidity.

The only one, apart from most economists, to make sense of it is Peter Martin.

I have estimated that 5c a litre would save me between $1.50 and $2 a week.

I believe I am an average user of petrol. I am not a member of any political party.

Stan Cronin, Watson

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