Fight not over yet on fuel-based charging

Trucking lobby stands firm on fuel-based charging, rejecting proposal from bureaucrats for “enormously expensive” mass-distance-location model

Fight not over yet on fuel-based charging
Fight not over yet on fuel-based charging
By Brad Gardner | July 21, 2011

The trucking lobby is standing firm in its case for a switch to fuel-based heavy vehicle charging, rejecting a proposal from bureaucrats for an "enormously expensive" and "complex" mass-distance-location model.

Responding to the preliminary findings of the COAG Road Reform Plan (CRRP), the Australian Trucking Association (ATA) maintains its fuel-based scheme is the most effective method of charging trucks for the cost of using roads.

Work is currently underway to replace the existing system that is built on fuel excise and registration charges, with the CRRP recommending a staged approach to charging trucks based on their mass, the distance travelled and the roads they use. It believes a fuel-based scheme is inadequate.

"We don’t agree with their analysis of fuel-based charging. In particular the work they’ve done substantially devalues the worth of having a simple system. One of the key principles of tax reform is simplicity. They have ignored that principle in their report," ATA Government Relations Manager Bill McKinley says.

The CRRP estimates applying mass-distance-location to a portion of the trucking industry will cost close to $4 billion over 30 years due mostly to the price of installing GPS and mass monitors in vehicles.

However, the report does not cover the price-tag for the billing system that needs to accompany the scheme.

"Their cost-benefit analyses omit vitally important costs involved in setting up a mass-distance-location based charging system, specifically the cost of running the billing system which is going to be enormously expensive," McKinley says.

"Omitting the cost of a billing system in the cost benefit analysis is a significant flaw in the proposal."

McKinley says the ATA will pursue its argument for fuel-based charging in its formal response to the CRRP’s preliminary findings, during the forthcoming tax summit and when the Productivity Commission begins its inquiry into the fuel excise.

The ATA fears a mass-distance-location scheme will impose too much of an administrative burden on operators.

"We would argue that the model that we have proposed doesn’t just recover the money that’s required, it is a good enough proxy for the cost of road use and finally it carries an increased incentive for operators to run on an efficient basis," he says.

The ATA proposes a flat annual registration fee of $400 for all trucks and trailers. The fuel excise will be increased to cover the reduction. Two-axle rigid vehicles will pay a lower fee than three-axle rigids and all articulated vehicles. The idea is that vehicles travelling more will pay higher road user charges.

"It seems to us that what the proponents of mass-distance-location charging have is a solution – a technology-based GPS solution – in search of a problem rather than the other way around," McKinley says.

The CRRP says it is technically and economically feasible to implement a mass-distance-location scheme, which it believes will cost $12 billion over 30 years if applied across the entire transport fleet. That figure does not include the price of a billing system.

It claims directly charging industry based on the mass, distance and location of a vehicle will encourage operators to use vehicles and routes more efficiently.

The report proposes establishing an independent infrastructure fund to collect the charges from the industry and distribute them to the relevant road managers.

According to the preliminary findings, the reforms will deliver funding certainty to governments, which will in turn lead to greater investment in the road network. The CRRP claims a fuel-based charging system will not provide any information on vehicle road use.

As the group stages a number of public consultation sessions across the country on the recommendations, McKinley has urged the Federal Government to consolidate the multiple fuel pricing and excise inquiries.

Referring to the CRRP, last year’s Henry tax review and the forthcoming Productivity Commission inquiry, he says there needs to be one review process.

"You can’t have three different inquiries or three different review processes looking at essentially the same issues starting from fundamentally different starting points," McKinley says.

"When all these reports are completed down the track, government ministers will be presented with three entirely different sets of recommendations, I would expect. So what are they going to do then? Call a fourth inquiry to review the recommendations of the last three?"

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