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
Oil and Gas Journal
TIMING
Jan 2009
BILLION BARRELS
(Gb)
1342
World Oil
EIA
Year end 2007
2008
1184
1241
BP Statistical Review June 2009
ABARE End of 2008
1258
1408
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 Model Year Engine Power/
Litres Weight KW/tonne
Performance
0/100km
20 Holden FX Nov 1948 2.15
45/1012=
44.46
Holden
HD
Feb 1965 2.45
86/1216=
70.72
Holden HJ July 1974 3.3
96/1338=
71.75
Holden VL Mar 1986 3.00
114/1250=
91.20
Holden VE July 2008 3.6
180/1700=
105.88
13.2
13.1
7.04
8.6

AUSTRALIAN TAX POLICY

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 CHANGEOTHER
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

6
7
4
5
0
1
2
3
11
12
13
8
9
10
17
18
19
20
14
15
16
POINTS
CALCULATION OF POINTS TO DETERMINE LUXURY ENERGY TAX UNITS
WEIGHT
(KG)
CAPACITY
(CC)
POWER
(KW)
CO
2
EMISSIONS
(g/km)
600
700
800
900
1000
1100
1200
1275
1350
1425
1500
1550
1600
1650
1700
1750
1800
1850
1900
1950
2000
600
850
1100
1350
1600
1850
2050
2250
2450
2650
2850
3000
3150
3300
3450
3600
3700
3800
3900
3950
4000
80
90
100
110
40
50
60
70
120
130
140
150
160
165
170
175
180
185
190
195
200
120
130
140
150
80
90
100
110
155
160
165
170
175
180
185
190
195
200
215
220
225

HOLDEN EPIKA
Weight
Capacity
Power
CO
2 emissions
Total
Specifications
1499kg
2500cc
115KW
221g
Points
10
9
8
20
47

TAXING POINTS CONVERTED TO TAX UNITS
FOR IMPOSITION OF LUXURY ENERGY TAX
Imposition of
Tax
Initial new purchase of vehicle
Road
Registration
Fuel
Consumption per litre
Maintenance per $100 spent
Tax Units per
Point
Holden
Epika (47)
1000 tax units 47000
100 tax units
0.2 tax units
10 tax units
4700
9.4
470

7
8
5
6
9
3
4
1
2
10
DEMONSTRATION OF LUXURY ENERGY TAX FOR HOLDEN
EPIKA
Year Value per tax unit set by
Govern ment
$
0.01
0.02
0.03
0.04
0.05
0.15
0.25
0.5
0.75
1
Initial
Purchase
$
Road
Holden Epika
Fuel
Registrati on
$
Per litre
$
470
940
1410
1880
2350
7050
11750
23500
35250
47000
47
94
141
188
235
705
1175
2350
3525
4700
0.094
0.188
0.282
0.376
0.47
1.41
2.35
4.70
7.05
9.40
Maintenan ce
Per $100
$
4.70
9.40
14.1
18.80
23.50
70.50
117.50
235.00
352.50
470.00

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.