The institute has stated in its latest report, Fuelling budget report: How to reform fuel taxes for business, that cutting the $8 billion a year in fuel tax credits given to businesses by at least 50 per cent could only add around 35¢ to the average $100 grocery shop but would be instrumental in repairing the budget and reducing carbon emissions.
The report found that only about half of the current fuel tax outlay is justified in economic or social terms and that fuel tax credits are gnawing away an ever-growing share of fuel tax revenue.
It revealed that 10 years ago, credits reduced gross fuel tax revenue by 30 per cent but now it’s almost 40 per cent.
“Winding back the credits could reduce the structural budget deficit by about 10 per cent, or $4 billion a year,” the report stated.
“It would also help Australia hit its target of net-zero emissions by 2050, because burning diesel contributes about 17 per cent of Australia’s total carbon emissions.”
Presently, no fuel tax is payable for vehicles that only drive off-road, such as trucks on mine sites, and a reduced rate of fuel tax is payable for on-road vehicles heavier than 4.5 tonnes, such as semitrailers, B-doubles, and passenger buses.
“There is no business reason why larger vehicles should pay less than smaller vehicles — in fact quite the reverse, since heavy vehicles do far more damage to roads,” the report continued.
The report recommends that heavy on-road vehicles should pay the same rate as utes, vans, cars, and small trucks used by businesses.
“Off-road vehicles and machinery should still be eligible for fuel tax credits, but at a lower rate than now, to reflect the damage their carbon emissions cause to the environment and community,” the institute added.
“Cutting fuel tax credits would be a win-win: it would shrink the budget deficit and help Australia hit net-zero carbon emissions by 2050.”
