Whatever you might think of Treasurer Joe Hockey’s elitist comments about “poor people” and their cars, there are a couple of things that every motorist should know when it comes to fuel excise.
They should go outside and paint two large concentric red circles on the sides of their cars because, right now, they are being hit by Government as an ‘easy target’.
Worse, if the Federal Government’s proposed lifting of the cap on fuel excise goes through, they are about to be hit a lot harder.
And, yes, this is a regressive tax, notwithstanding the weasel words of the Treasurer on the issue.
Rich or poor, if you rely on your car you will be paying more tax through the bowser.
For any lower income families who happen to rely heavily on their cars, like, say, in regional Australia or in the outer suburban fringes, that increased tax impost will be a disproportionately larger part of the household income.
That’s a regressive tax - upside down, sideways, any way you want to look at it. It takes a larger part of a lower income, and a lesser part of a higher income.
And regressive taxes hit the poorest hardest. Even the noble arch-conservatives of the News Limited press have attacked the Treasurer’s position.
But notwithstanding that debate and the curious hole the Treasurer has dug for himself, there is a con on motorists in this whole fuel excise issue.
The Con: that the fuel excise goes back into road funding.
What obscures the issue is the way the totals of “money in, money out” are presented.
On the face of it, the totals in fuel excise collected, and the annual expenditure on Australian roads and road infrastructure, are, give or take, about line-ball.
The excise is currently capped at 38.143 cents per litre (cpl). In case you are unaware, you also pay GST on this excise as well as the GST on the remainder of the fuel purchase.
This is offset by rebates under the Fuel Tax Credits Scheme.
According to Australian Tax Office statistics (2011/12), this amounted to $5.527 billion across the various industry sectors including the farming and resources sector.
But the Government is preparing to legislate to increase the fuel excise levy, and for it to continue to increase.
Under this legislation, the Abbot government proposes to reintroduce biannual indexation of fuel excise, hitching it to changes in the consumer price index (CPI). This is expected to add around one cent per litre to the cost at the bowser of petrol and diesel in the 2014/15 budget year.
And will keep rising as the CPI rises.
Over the forward estimates (the next four years), this will raise an expected additional $4.15 billion. (Australian Government, Budget measures: budget paper no. 2: 2014-15)
Ok, so that’s the “money in” - around $18.57 billion now, but rising by $4.15 billion over the next four years. (budget.gov.au)
What then is the “money out” on roads and infrastructure funding?
That’s a little harder to compile.
According to the Australian Government’s ‘Public Road-Related Expenditure and Revenue in Australia’ report, released February 2011 (and, it would appear, the last encompassing report), “The total amount of funding for road-related expenditure by the Australian, State, Territory and Local Governments in 2008/09 was $15.8 billion.”
In that budget year, fuel excise brought $15.085 billion into Federal Government coffers.
So you could mistakenly think that there was a defensible position here; that the Federal Government is giving back to motorists what it lifts from their pockets through the excise at the bowser.
But it doesn’t. And nothing like it.
In the budget year covered by that report, despite collecting $15.085 in excise, the Federal Government’s contribution to roads and road infrastructure was $4.9 billion.
In the same year, State and Territory Governments contributed $9.9 billion in road expenditure, and Local Governments spent $3.4 billion.
State Governments contributions to road funding come from registration fees, GST revenues, stamp duty on vehicle sales, insurance premiums and other sources. In other words, also funded in large part (though not entirely) from motorists’ and road users’ pockets.
Local Government road funding, of course, comes largely from rates and charges on residents and business.
The threshold question then is this: should all of the excise raised from petrol and diesel go back into road infrastructure and roads upkeep funding?
The view that it should comes from a historical funding model that can trace its roots as far back as 1927 and reinstated in 1982, that “all or part of the revenue raised by petrol and diesel excises was hypothecated (earmarked) to fund expenditure on roads” (Budget measures: budget paper no. 2: 2014-15).
That same Budget paper notes that “in fact, Commonwealth spending on roads is considerably less than excise revenue. Moreover, successive Commonwealth governments have seen petrol and diesel excises as a source of general revenue”.
But is it fair? Should only one dollar in three (approximately) collected from fuel excise be spent on roads and road infrastructure.
As Terry Conroy, VACC Service Station Division Manager told TMR:
“If this excise had been used correctly, our road system would be the envy of the world. Especially for the environmental and fuel conservation outcomes that could have been achieved as a result.”
Those same Budget Strategy and Outlook Papers show that company tax in the 2013-14 year will come in at $71.65 billion. In other words, the total revenue raised from fuel excise amounts to, comparatively, around 25 percent of the total raised from company tax.
Does that seem a fair burden for motorists - and families, even poor ones filling up at the pump - to carry?
Or does that seem more like the Federal Government bleeding an easy mark? And when the excise is discussed in the context of funding for roads and road infrastructure, are we merely being conned?
And of Joe Hockey’s comments?
Beside the bland elitism in the Treasurer’s comments that petrol tax - the increase in excise - will not hurt the poor because they don’t own cars or drive as far as richer people, Mr Hockey might do to remember that it is the conservative regional and rural vote that, by and large, keeps Coalition Liberal/National Governments in office.
But, as ABS figures consistently demonstrate, (ABS release 20/12/2013, SUMMARY STATISTICS, AUSTRALIA, 2010-11) regional Australians earn less than their city counterparts.
They also rely on their cars more, travel more, pay more for petrol, have less public transport options and limited access to it.
There is also, as Australian Census figures show, proportionally more aged pensioners on fixed incomes in regional Australia. (A snapshot of poverty in rural and regional Australia, 14 October 2013: ACOSS and National Rural Health Alliance)
Again, closer to the cities, household incomes in outer-suburbs are consistently less than innercity incomes. And yet again, in outer suburbs - in those mortgage-belts that change goverments - families there are less served with public transport, and rely on their cars more.
So which cloud in cloud-cuckoo-land was the Treasurer sitting on when he decided to expose his ivory-towered well-fed underbelly with his comments about “the poor” and their use of cars?
We would hope that our legislators, at the very least, knew just a little about Australia and the impacts on ordinary Australians of the laws they are making.
Joe, unfortunately, demonstrated the opposite and just seems to want to keep digging.
TMR Managing Editor