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Powering Regional Australia: The case for fuel tax credits

18 March 2015

An unprecedented coalition of groups from the agriculture, fishing, forestry, tourism and resources sectors has joined together to set the record straight on the case for the fuel tax credits scheme, also commonly known as the diesel fuel rebate.

The Fuel Tax Credits Coalition today released a new publication, Powering Regional Australia: The Case for Fuel Tax Credits, designed to promote a balanced and informed debate on the purpose and impact of the FTCS.

The publication argues that the fuel excise introduced to contribute to the cost of building public roads should not apply to diesel used off-road or in off grid power generation. It also argues that the tax provisions are founded on a fundamental principle of sound tax policy, namely taxes on intermediate business inputs are inefficient and distortionary.

The report brings the case for the FTCS to life by highlighting 18 case studies drawn from 18 different businesses and communities – small, medium and large – from all states and the Northern Territory.

“The diesel excise rebate is not a subsidy or a handout as the excise paid on diesel was originally introduced to pay for road infrastructure. To put it simply we don’t pump water on public roads and we only receive the rebate for off road use,” Mr Tom Chesson CEO of the National Irrigators’ Council said.

“Any Government cuts to the scheme would be greeted with dismay by irrigated agriculture that is already reeling from the high cost of energy,” Mr Chesson concluded.

Brent Finlay, President of the National Farmers’ Federation, said that food producers were only reimbursed for tax already paid on a key business input.

“The fuel tax credits scheme is critical for Australia’s agricultural sector, where food producers already operate without the subsidies enjoyed by our international competitors.”

“We welcome the fact that the FTCS enjoys strong backing from both major political parties. This report is designed to ensure that the false claims made by the Greens and some environmental activists gain no traction,” said Brendan Pearson, chief executive of the Minerals Council of Australia.

The report comprehensively rebuts claims that the credits are a fossil fuel ‘subsidy’. Imposing a tax on diesel, a critical and unavoidable business input for many Australian businesses, would not remove a ‘subsidy’. It would instead impose a new tax on regional Australian businesses.

As a senior Treasury official told a Senate hearing in June 2014, “the principal rationale behind the fuel tax credit system … was to ensure that a number of industries that used fuel off road were not subject to double tax.”

It is clear that it makes no sense to impose an effective road user charge in the form of fuel excise on fishing trawlers, harvesting equipment or diesel generators powering community facilities such as hospitals, schools and tourist accommodation located off the electricity grid. To do so would represent a large and unfair super tax on regional and remote
Australia.

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