Treasurer puts heavy vehicle road taxes on the agenda but rejects industry attempt to be involved in the debate
By Brad Gardner | July 29, 2011
The Federal Government will use its upcoming Tax Forum to gauge public support for a radical new road charging scheme for heavy vehicles.
Treasurer Wayne Swan yesterday released a discussion paper on the forum, which will be held from October 4 to 5 to discuss the findings of last year’s review of Australia’s tax system by former Treasury head Ken Henry.
He recommended a variable congestion tax and a scheme that fits trucks with GPS and on-board mass monitors and charges them based on a vehicle’s weight, distance travelled and roads used.
Saying existing road taxes are not good enough, the Tax Forum discussion paper asks: “Should Australia consider ways to more closely link road charging to the impact users have on the condition and upkeep of roads?”
As well as asking the public if congestion charging should be introduced, the discussion paper calls for responses on ways governments could use taxes to make sure people take into account the environmental impact of their decisions.
The discussion paper, which also poses questions for reforming business and state taxes, says the fuel excise and registration fees do not provide incentives for trucking operators to choose routes and vehicle configurations that minimise road damage and flow-on costs.
“The current charging system also results in significant cross subsidies between different types of heavy vehicle operators,” it says.
The COAG Road Reform Plan has recommended a mass-distance-location scheme for multi-combination vehicles and heavy truck trailers.
In his review, Henry suggested a congestion charge that varies based on time of day and the size of a vehicle, meaning trucking operators will pay a higher fee than a motorcyclist.
He believes existing road user charges are insufficient because they do not factor in a vehicle’s contribution to traffic delays, road damage and pollution. Henry says a congestion charge will lead to less peak-hour delays and shorter travel trips, in turn reducing demand on the road network.
“Road prices that reflect congestion, road-wear and environmental costs would give road users both the information and the incentive to reduce the trips that are most costly to society,” the review says.
While the NSW, Victorian and Queensland governments have ruled out imposing a congestion charge, the Tax Forum discussion paper has sought feedback from the public on what it thinks should be done to improve the traffic network.
“Building more roads is one way to try to address congestion concerns, but equally important is better utilisation of existing infrastructure. There are physical, environmental and financial limits on the construction of new transport routes,” the paper says.
“Is there a case to more closely link road charging to the impact users have on the level of congestion on particular roads?”
SWAN SNUBS TRUCKING’S CALL FOR INVOLVEMENT
Despite the government discussing reforms that have the potential to inflict multi-billion dollar costs on trucking operators, it has ignored a request from the Australian Trucking Association (ATA) to be a part of the Tax Forum.
Swan has invited 156 representatives from the community, business, union, government and academic sectors to take part in the forum.
The ATA attempted to score a seat as part of the business representatives group, which includes the Australian Chamber of Commerce and Industry, Australian Industry Group, Business Council of Australia and the National Farmers Federation.
The ATA will now need to compete with other stakeholders in an online process that will grant another 16 positions on the business representatives group.
“We previously applied to be included in the summit, and our request wasn’t taken up. So now we’ll apply through the expressions of interest process, since it would be ludicrous for the government to debate tax measures affecting the trucking industry without involving people representing trucking operators,” ATA CEO Stuart St Clair says.
The ATA is strongly opposed to mass-distance-location charging, claiming it will be too complex and expensive. It wants a fuel-based charging model instead and for registration fees to be capped at $400.
St Clair says existing fees, which have pushed the cost of registering a nine-axle B-double to $15,708, are too high and cause operators difficulty in managing their cashflow to pay for them.
“The charges are fixed, so they don’t vary with the distance trucks travel and there is no link between where operators use their vehicles and road funding,” he says.
Under the ATA’s model, the fuel excise will be increased to account for the drop in registration fees and heavier vehicles will pay a higher excise than smaller trucks.
St Clair claims mass-distance-location pricing will be a “compliance nightmare” for operators and enormously expensive – a view not shared by transport academic Professor David Hensher.
The ATA is also arguing against the introduction of a congestion charge, believing governments will only slap it on trucks.
“Governments are most unlikely to impose congestion charging on cars because it would be deeply unpopular. If they did it at all, it would be on trucks where it wouldn’t make a difference,” St Clair says.
He says cars account for most of the km travelled in metropolitan areas, meaning any attempt to reduce urban congestion must focus on motorists.
“The only effect of congestion pricing would push up freight costs, leading to higher prices for very item carried in a metropolitan area by a truck,” St Clair says.
He claims governments should focus on investing in better roads, public transport and intelligent transport systems to reduce urban traffic congestion.
DEBATING BUSINESS TAX REFORM
The Tax Forum discussion paper has sought feedback on reforming business taxes, such as if the 30 percent company tax rate should be lowered further than the 1 percent the government has already committed to.
Those advocating for the company tax rate to fall will be asked to provide suggestions on how the government can fund it.
The forum will also address possible reforms to payroll tax and stamp duties, which make up the majority of state government tax revenue.
The paper highlights problems with the current payroll tax system because of the exemptions it provides based on the type of business activity, wages and the size of payroll.
“The exemptions distort behaviour, increase compliance costs for businesses, and reduce productivity. Each State determines its own payroll size threshold and rate, and these vary substantially,” it says.
According to the discussion paper, more than 90 percent of NSW businesses are exempt from payroll tax under the current tax free threshold.
The Henry review recommended doing away with payroll tax in favour of a broader-based charge that removes exemptions.
Swan is also seeking public feedback on insurance taxes, which the discussion paper says are high compared to other countries.
The paper says the taxes have been a growing source of revenue for the states, adding that they collected about $4.6 billion from them in 2009-10.
“Insurance taxes are an inefficient way of raising revenue and can disproportionately impact on some sections of the community, such as those on low incomes,” the paper says.
Henry called for a more equitable scheme to replace the existing system. The government is currently reviewing natural disaster insurance.
The forum will include political leaders and their treasurers from the states and territories, Prime Minister Julia Gillard, Swan, Infrastructure and Transport Minister Anthony Albanese and Small Business Minister Nick Sherry.
Independents Rob Oakeshott, Nick Xenophon, Tony Windsor, Bob Katter and Andrew Wilkie have also been included, along with the Greens, Nationals MP Tony Crook and Democratic Labor Party Senator John Madigan.
Ten general public observers will be permitted and will be decided based on an online application process. The Tax Forum will also permit 26 observers from federal and state government agencies and ten students.