CEO of the Minerals Council of Australia Tania Constable has issued a plea for government to rescind or dramatically alter proposed changes to the fuel tax credit schemes, claiming “diesel is the lifeblood of Australia”.
Constable’s call to action has come after independent MPs Kate Chaney, Allegra Spender, Zoe Daniels and ACT senator David Pocock called for significant changes to be made to the scheme.
The fuel tax credit scheme has cost an estimated $200 billion adjusted for inflation according to The Australia Institute, which released data following a National Farmer Rally that called for the scheme to be scrapped for mining, but not farming.
The scheme provides businesses that offer fuel-powered equipment in Australia a rebate on some of the excise and/or customs duty taxes they pay for fuel.
It has been valued at $10.2 billion for 2024-25.
Senior Economist at the Australia Institute Matt Grundoff says keeping the scheme for the mining industry goes against other policy introductions in recent year.
“Subsidies such as the fuel tax credits scheme for the mining industry are not consistent with policy settings designed to phase out fossil fuels and limit the worst effects of climate change,” Grundoff says.
“The rebate is a subsidy for fossil fuel use, which is driving climate change that is impacting all of us but farming in particular.
“Cutting out an exemption for farmers would only cost taxpayers $1.3 billion and still gather an extra $4.8 billion from the mining industry.”
Constable asserts cutting the scheme for mining would lead to a slippery slope where it is cut for other industries.
“Removing tax credits would create a new tax on Australia’s most productive, job-creating industries, with costs ultimately passed to households already struggling with rising living expenses,” Constable says.
“A new tax on farmers means higher grocery prices. A new tax on construction means higher housing costs. A new tax on mining erodes Australia’s global competitiveness. The ripple effects of such a tax would be felt right down the supply chain, from the farm gate to households.
“For 50 years in Australia, a straightforward rule has guided road funding: if you drive on public roads, you pay a fuel excise tax. If you use fuel off-road, you get a tax credit for the excise you have already paid.
“This fair system ensures road taxes are for road users.
“But this equitable system is now firmly in the sights of some teal MPs and crossbench senators who despite irrefutable Treasury analysis and reams of expert opinion to the contrary, wrongly slander fuel tax credits as ‘fossil fuel subsidies’.
“First, they come for the miners, then they come for the farmers and other essential industries. It’s a slippery slope.”
Economist Chris Richardson says the fuel tax system should not be changed as a result of Australia failing to reach emission targets.
“You shouldn’t change the fuel tax credit system if Australia is having trouble in meeting its emission targets,” Richardson says.
“If the intent is to do the right thing on the tax front and the right thing in helping to fight global warming, then the key is to have two good policies rather than one flawed one.”
Constable says existing climate change policies in the mining sector negate the need for changes to the scheme.
“Australia has significant policy infrastructure in place to tackle climate change, laying the foundation for a more sustainable future. We have a system in place to do the heavy lifting for Australia to meet these important emissions reduction targets,” she says.
“These measures include the safeguard mechanism, designed to reduce emissions from large industrial companies, 58 per cent of whom work in the mining sector. It includes the Renewable Energy Target, which drives the shift towards cleaner energy sources, as well as various energy efficiency and renewable fuel policies.
“Australian mining wholeheartedly supports the bipartisan ambition of reaching net zero by 2050 and is investing billions in technology to fast-track emissions reduction.
“But you don’t tax your way to fixing the problem.”
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