AUSTRALIAN PERSPECTIVE OF TRANSPORTATION AND TAXATION : A R ELATIONSHIP BUT NO M ARRIAGE 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 problem Australian transport policy and growth of private vehicles Australian tax policy and its influence on transportation choices Tax policy change Proposed Luxury Energy Tax

LIQUID FUEL PROBLEM OIL RESERVES REPORTED FROM SELECTED AGENCIES NAME OF REPORTING AGENCY TIMINGBILLION BARRELS (Gb) Oil and Gas JournalJan World OilYear end EIA BP Statistical ReviewJune ABAREEnd of Source: Owen, Inderwildi & King (2010) ABARE: World – 42 years of proven oil reserves Australia: 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 WEIGHT Car ModelYearEngine Litres Power/ Weight KW/tonne Performance 0/100km Holden FXNov /1012= Holden HD Feb /1216= Holden HJJuly /1338= Holden VLMar /1250= Holden VEJuly /1700=

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 CO 2 emissions. Points are converted to tax units. LET = Tax units x Tax rate

POINTSWEIGHT (KG) CAPACITY (CC) POWER (KW) CO 2 EMISSIONS (g/km) CALCULATION OF POINTS TO DETERMINE LUXURY ENERGY TAX UNITS

HOLDEN EPIKA SpecificationsPoints Weight1499kg10 Capacity2500cc9 Power115KW8 CO 2 emissions221g20 Total47

Imposition of Tax Tax Units per Point Holden Epika (47) Initial new purchase of vehicle 1000 tax units47000 Road Registration 100 tax units4700 Fuel Consumption per litre 0.2 tax units9.4 Maintenance per $100 spent 10 tax units470 TAXING POINTS CONVERTED TO TAX UNITS FOR IMPOSITION OF LUXURY ENERGY TAX

YearValue per tax unit set by Govern ment $ Holden Epika Initial Purchase $ Road Registrati on $ Fuel Per litre $ Maintenan ce Per $100 $ DEMONSTRATION OF LUXURY ENERGY TAX FOR HOLDEN EPIKA

ADMINISTRATION LET section through current licensing department Smart debit card – prepayments of units required Registered Vehicles: LET registration number All 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.