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Congestion tax back on the agenda

Taxing questions: The federal government’s tax forum discussion paper puts congestion charging, as already exists in Sweden (pictured) and the UK, back on the agenda for Australia.

Federal discussion document revives Henry review’s congestion tax recommendation

1 Aug 2011

UPDATED: 02/08/2011THE federal government has put a vehicle congestion tax on the agenda for a tax forum scheduled in October, reviving a recommendation from last year’s Henry tax review that a ‘road-user charge’ be introduced in Australia.

The proposed tax, which was widely supported by Australia’s motoring associations at the time of the Henry Review, resurfaced in a discussion paper released last week by treasurer Wayne Swan, which asks the question: “Is there a case to more closely link road charging to the impact users have on the level of congestion on particular roads.”

It also suggests discussion of whether Australia should “consider ways to more closely link road charging to the impact users have on the condition and upkeep of roads”.

The road transport tax section of the document focuses on the doubling of road freight during the past 20 years and the implications of a projected further doubling by 2030.

It cites concerns over road wear and the lack of incentives for operators to “choose routes and vehicle configurations that minimise road damage and costs on others”.

80 center imageFrom top: London Congestion Charge zone road marking, FCAI acting chief executive Steve Payne, AAA executive director Andrew McKellar.

It goes on to say the Council of Australian Governments is “considering reforms to road charging and funding based on giving better incentives to operators by charging heavy vehicles on the basis of their mass, the roads they use, and the distance travelled”.

Citing the 2010 Henry taxation review’s recommendation that governments consider introducing congestion charges like those introduced in European cities such as London and Stockholm, the paper suggests that ensuring “better utilisation of existing infrastructure” is as important a measure for addressing congestion as building more roads.

Interestingly, although the discussion paper refers to the Henry report’s suggestion of implementing a congestion tax, it continues to ignore the same report’s recommendations on the abolition of the Luxury Car Tax.

The Federal Chamber of Automotive Industries has said it would be willing to consider supporting the controversial road-user charge as long as other imposts on motorists such as stamp duty on motor vehicles, fuel excise and registration charges are also on the table for discussion.

FCAI acting chief executive Steve Payne declined to comment until the organisation had seen exactly what the government has in mind.

“It’s better for us to see what the government is proposing with the whole array of transport taxes and their interaction with the carbon tax,” he said.

Australia’s motoring organisations, including the Australian Automobile Association (AAA) and its member bodies such as the NRMA, RACV and RACQ, have also been keen to pursue the implementation of the road-user charge system.

When the Henry review was published in May 2010, incumbent AAA chief executive Mike Harris welcomed its proposals and said it would make strong representations to the federal government seeking a specific timeline on the introduction of road-user charges.

New AAA executive director Andrew McKellar today told GoAuto that while his organisation reserves its position on any model for congestion tax and road pricing until it has seen the alternatives being developed, it is concerned that motorists are not getting a fair deal in terms of the reinvestment of tax revenue on the quality, efficiency and safety of the transport sector.

Mr McKellar said the AAA and its member bodies remained open minded and called for reform of all motoring taxes including luxury car tax, stamp duty, fuel excise and “various other imposts”.

“The tax burden on motorists must not be increased,” he said. “The existing tax structure must be remodelled and replaced.”“It is an absolute priority that the AAA takes an interest in and will take part in the debate in the run up to the tax forum (in October).”

Other subjects for discussion in the document include taxing LPG, LNG and CNG road-fuels “but with a 50 per cent discount that recognises the potential environmental and fuel security benefits of their use”, plus the reform of the fringe benefits tax announced in May’s federal budget announcement.

On Thursday, the Sydney Daily Telegraph newspaper carried a front-page report that the federal government was considering congestion charging and other changes “on top of the carbon tax”.

In response, prime minister Julia Gillard ruled out federal support for a congestion tax. She told reporters in Geelong on Friday that the Daily Telegraph report was “entirely a work of fiction”.

“I hope they enter it for one our fiction prizes in Australia we have a number and they may have a winning entry,” she said.

“The federal government has ruled out support for congestion taxes in the past, and we have ruled it out again.”

However, Ms Gillard alluded to the fact that states and territories may be free to independently impose congestion charging by saying: “In any event, these are questions for state governments.”

Opposition treasury spokesman Joe Hockey questioned the prime minister’s denials, saying: “Even if Julia Gillard gives an iron-clad commitment there will be no carbon tax under the government she leads, there will be no congestion tax under the government she leads, who can believe her.”

In an interview published on the Liberal party’s website, opposition leader Tony Abbott hit out at the fact the Coalition had not been invited to the forum.

“Typically for this government, there are academics, there are unions, but the largest group of parties in the parliament, the Coalition, has not been invited to attend,” said Mr Abbott.

“It’s typical of a government, which is only interested in talking to the people who it thinks agree with it.”

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