AUSTRALIAN PERSPECTIVE OF TRANSPORTATION AND TAXATION:A RELATIONSHIP BUT NO MARRIAGE

PRAFULA PEARCE, LECTURER, SCHOOL OF BUSINESS LAW & TAXATION, CURTIN UNIVERSITY

INTRODUCTION

Is there a relationship between transportation and tax policy in Australia

Is a change in tax policy required to promote the use of more fuel efficient vehicles and reduce its use?

OUTLINE

Liquid fuel problemAustralian transport policy and growth of private vehicles

Australian tax policy and its influence on transportation choices

Tax policy changeProposed Luxury Energy Tax

LIQUID FUEL PROBLEMOIL RESERVES REPORTED FROM SELECTED AGENCIES

NAME OF REPORTING AGENCY

TIMING BILLION BARRELS (Gb)

Oil and Gas Journal Jan 2009 1342

World Oil Year end 2007 1184

EIA 2008 1241

BP Statistical Review June 2009 1258

ABARE End of 2008 1408

Source: Owen, Inderwildi & King (2010)

ABARE: World – 42 years of proven oil reservesAustralia: 10 years of crude oil; 31 years of condensate and 20 years of LPG

AUSTRALIAN TRANSPORT POLICY

Transportation falls within the jurisdiction of States.

Feb 2008: Australian transport Council Ministers – National transport policy framework.

Objectives: Promote efficient and sustainable movement of people and goods; minimise emissions and consumption of resources and energy

REGISTERED CARS AND STATION WAGONS

TRAVEL TO WORK OR STUDY

CARS: POWER AND WEIGHTCar Model Year Engine

Litres

Power/

Weight KW/tonne

Performance

0/100km

Holden FX Nov 1948 2.15 45/1012=

44.46

20

Holden HD

Feb 1965 2.45 86/1216=

70.72

13.2

Holden HJ July 1974 3.3 96/1338=

71.75

13.1

Holden VL Mar 1986 3.00 114/1250=

91.20

7.04

Holden VE July 2008 3.6 180/1700=

105.88

8.6

AUSTRALIAN TAX POLICY

AUSTRALIAN TAX REVENUES 2009/10

Australia’s future tax system: Final Report: Overview

CALTAX PETROL PRICE AT 12 JUNE 2009

IMPACT OF CURRENT TAXES ON FUEL CONSUMPTION BY MOTORISTS

PRRT and Crude oil excise: Tax on profits – no impact on motorists

Fuel Excise: Inelastic – use declines1.5% with 10% increase in fuel price.

FBT: Statutory formula imposes less tax with more driving

LCT: Tax based on cost of car, not consumption of fuel

HENRY REVIEW RECOMMENDATIONS

Abolish LCT Replace vehicle registration tax with

road user charge Introduce congestion tax Recommendations will promote

national transportation policy.

TAX POLICY CHANGE-OTHER COUNTRIES

UK and Ireland: Car purchase taxes based on CO2 emissions

Netherlands: Introduced charge per km driven tax starting in 2012 starting at 3 Euro per km. Use GPS device.

Oregon: Process of developing road user fee. Task Force in 2001 recommended road user fee and congestion charge using fuel pump station to collect the charge using vehicle detection device and central reader.

LUXURY ENERGY TAX (LET)

My recommendation: Introduce Luxury Energy Tax imposed on purchase and use based on power and weight of vehicle.

It has the potential to include road user charge and congestion tax.

Will bring about education that energy is a luxury.

It has potential to change motor manufacturer and buyer’s habits to seek lower power to weight vehicles.

PRINCIPLES OF LET

LET charged to registered owner of vehicle at 4 levels:- Initial purchase- Annual registration- Fuelling - Maintenance and insurance

Vehicles attract points based on: Weight; Engine capacity; Power and CO2 emissions.

Points are converted to tax units. LET = Tax units x Tax rate

POINTS WEIGHT(KG)

CAPACITY(CC)

POWER(KW)

CO2 EMISSIONS(g/km)

0 600 600 40 80

1 700 850 50 90

2 800 1100 60 100

3 900 1350 70 110

4 1000 1600 80 120

5 1100 1850 90 130

6 1200 2050 100 140

7 1275 2250 110 150

8 1350 2450 120 155

9 1425 2650 130 160

10 1500 2850 140 165

11 1550 3000 150 170

12 1600 3150 160 175

13 1650 3300 165 180

14 1700 3450 170 185

15 1750 3600 175 190

16 1800 3700 180 195

17 1850 3800 185 200

18 1900 3900 190 215

19 1950 3950 195 220

20 2000 4000 200 225

CALCULATION OF POINTS TO DETERMINE LUXURY ENERGY TAX UNITS

HOLDEN EPIKA

Specifications Points

Weight 1499kg 10

Capacity 2500cc 9

Power 115KW 8

CO2 emissions 221g 20

Total 47

Imposition of Tax

Tax Units per Point

HoldenEpika (47)

Initial new purchase of vehicle

1000 tax units 47000

Road Registration

100 tax units 4700

Fuel Consumption per litre

0.2 tax units 9.4

Maintenance per $100 spent

10 tax units 470

TAXING POINTS CONVERTED TO TAX UNITS FOR IMPOSITION OF LUXURY ENERGY TAX

Year Value per tax unit set by Government

$

Holden EpikaInitial Purchase

$

RoadRegistration

$

FuelPer litre

$

MaintenancePer $100

$

1 0.01 470 47 0.094 4.702 0.02 940 94 0.188 9.403 0.03 1410 141 0.282 14.14 0.04 1880 188 0.376 18.805 0.05 2350 235 0.47 23.506 0.15 7050 705 1.41 70.507 0.25 11750 1175 2.35 117.508 0.5 23500 2350 4.70 235.009 0.75 35250 3525 7.05 352.5010 1 47000 4700 9.40 470.00

DEMONSTRATION OF LUXURY ENERGY TAX FOR HOLDEN EPIKA

ADMINISTRATIONLET section through current

licensing departmentSmart debit card – prepayments of

units requiredRegistered Vehicles: LET registration

numberAll vehicles to be fitted with monitor

that identifies car ignition system and fuel tank

The fuel pump at petrol stations have vehicle and card reading devices

IMPACT

Centralised system with authorised agents permitted to debit smart card.

Agents=car dealers; licensing offices; insurance companies; repairers; pump stations.

Exemptions Effect: On purchasing, use and

maintenance of vehicle System can be extended to user

charges and congestion tax

ATTRIBUTES

Raise awareness that liquid fuel is a luxury Influence purchase of sustainable cars Raise revenue at four levels Encourage reduced driving and reduced

emissions Ease of payment by consumer using debit card Ease of collection by nominated agencies Easy to administer Low cost of administration Minimal evasion potential Protection of privacy and fair and transparent

CONCLUSION

Since Ford’s invention of constant moving assembly line, vehicles have become bigger and more powerful. Are they sustainable?

The current Australian tax policy does not promote the transportation policy.

The Australian Government should take the lead in implementing transportation taxes such as LET with synchronised user charges and congestion tax to promote efficient movement of people and goods with the least amount of liquid fuel.