Friday, 29 July 2011

Reactions to Australian tax reform discussion paper

As reported yesterday, the Australian Federal Government has floated both heavy vehicle road user charging and congestion charging as options for reform of motoring taxation in its latest discussion paper.

Initial reaction in Australia has been hardly positive:

Transport and Logistics News reports that the Australian Trucking Association wants a shift away from annual registration fees to higher fuel tax.  It argues against the high annual registration fees (which are designed to represent the difference between the damage larger trucks impose on the roads and the fuel tax they impose) for imposing high costs on small operators and not reflecting usage (which is correct).  However, it also says there is no link between where trucks are used and where revenue is spent.   Fuel tax is incapable of doing this as well.  Chief Executive Stuart St. Clair argues against a distance based charge because:

Mass-distance-location pricing would increase freight costs in rural areas. It would be a compliance nightmare for trucking operators, with enormous administrative and billing costs. It would also breach one of the fundamental principles of tax reform: simplicity

It would only increase costs for operations by trucks that have very high usage over long distances, but then again the long thin rural networks are the most expensive to maintain.   The "compliance nightmare" is ridiculously overstated, when it could be a simple monthly direct debit system if done electronically.   As for simplicity, why not argue that truck operators get paid by the government, which imposes a flat tax on all goods movement based on time it takes to move it?  How about charging all freight according to weight?  The market isn't simple, and neither should roads be treated in the same way as defence.

He also opposes congestion charging because he claims politicians would only impose it on trucks, which would be pointless.  He's right, in that a congestion charge on trucks would not be worth it (and would not deliver the benefits to trucks paying), but it is not a reason to scrap the idea.

Meanwhile, according to the Sydney Morning Herald, Prime Minister Julia Gillard has now denied the Government is even interested in congestion pricing, but said it was up to state governments.

This may contradict a report from the same newspaper that her Treasurer, Wayne Swan, says everything is up for grabs (in this area).

According to the Rouse Hill Times, NSW Roads Minister Duncan Gay argued in favour of more Federal funds for a rail link, instead of a congestion tax (showing his political nouse if not economic).  He said (according to Byron News):

it would be the very worst thing to do to the commuters of Sydney, who have no alternative in many cases but to use their cars... This is a state without an alternative form of public transport and if you haven't got alternative, good, public transport, in many areas of the city you are condemning people to pay twice"

The "paying twice" point is difficult to understand, but he also either doesn't understand that congestion charging doesn't need other modes to generate benefits, or doesn't think he could ever sell the idea.

Of course the real problem is that congestion taxes may only be able to get public support in most cases if they replace other taxes.  Then a conversation can be more easily had.

What clouds all of this debate is the very unpopular move by the Federal Government to push for a carbon tax, that would impose higher charges on the entire transport sector.  Given that Government's apparent penchance for increasing taxes, it is likely that many will see it as not being as trustworthy as it may wish in terms of tax reform that could be seen as revenue neutral.

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