NO.050

Treasurer’s Press Release No. 50

FUEL TAXATION INQUIRY

The Treasurer, the Hon Peter Costello, MP and the Minister for Industry, Science

and Resources, Senator the Hon Nick Minchin today announced the terms of reference

and the membership of the committee of inquiry into fuel taxation, as foreshadowed

by the Prime Minister on 1 March 2001.

The Inquiry will commence from today.

Committee of Inquiry Membership

The Committee of Inquiry will be chaired by Mr David Trebeck, Managing Director

of ACIL Consulting Pty Ltd, an economic and policy consulting company. Mr Trebeck

is based in Canberra. He is also a director of the publicly listed companies

Incitec Ltd and Pipers Brook Vineyard Limited. Through his consulting business,

Mr Trebeck has taken particular interest in microeconomic reform and competitiveness

issues, including in the agricultural, automotive, fisheries, forestry, aviation,

food processing and mining industries. He is a former Deputy Director of the

National Farmers Federation.

The Members of the Committee are Mr John Landels AC and Mr Kevin Hughes.

Mr Landels has considerable experience in corporate management in both the

private and public sectors, having held senior executive positions in Australia

and internationally, including Chairman and Chief Executive of Caltex Australia

Limited (1977-1991); Chairman of the NSW State Transit Authority (1988-1992);

Chairman of the NSW State Rail Authority (1992-1996) and Director of Air New

Zealand Limited (1993-1998).

Mr Hughes is Chief Executive Officer of the Service Station Association Ltd.

Mr Hughes has had an extensive career in the Australian petroleum industry,

including 16 years with Shell Co of Australia Ltd, where he held a number of

petroleum executive positions encompassing the management of Shells distributor

and Service Station networks. Mr Hughes also established and operated the petroleum

wholesale marketing company Hughes Petroleum Pty Ltd for 8 years. In recent

years, Mr Hughes has acted as a consultant to the petroleum products industry.

In announcing the Committee membership, the Treasurer and Senator Minchin noted

the substantial experience all members of the committee will bring to the inquiry

from their in-depth knowledge and understanding of the role that petroleum and

other fuel products play in the Australian economy and the community more broadly.

Terms of Reference

Releasing the terms of reference today, Senator Minchin said he had consulted

with a wide range of business, transport and motoring organisations since the

announcement of the inquiry in March 2001, including writing to more than 20

business and industry organistions seeking their comments on the terms of reference.

The Minister expressed his appreciation to those who had assisted the Government

during the consultation process in framing the final terms of reference which

are attached.

The Treasurer said the terms of reference requires the Committee to examine

the existing structure of fuel taxation in Australia, including related rebates,

subsidies and grants and report on the implications for the economy and economic

activity, environmental outcomes and petroleum pricing, cost structures and

marketing arrangements.

The Treasurer also noted that the terms of reference specifically focuses on

community interest in taxes levied on fuel products (ie indirect taxes such

as fuel excise and GST). The inquiry will therefore not be required to examine

direct taxes as they apply to business involved in fuel production (ie company

tax, payroll tax, petroleum resource rent tax).

The inquiry will also examine the proposed Energy Grants (Credits) Scheme (EGS),

which will replace the Diesel Fuel Rebate Scheme and the Diesel and Alternative

Fuels Grants Scheme from 1 July 2002.

Importantly, the terms of reference explicitly require the inquiry not to impact

on the Governments previously stated commitment that the EGS will maintain

benefits equivalent to those available under the Diesel and Alternative Fuels

Grants Scheme and the Diesel Fuel Rebate Scheme.

This will be a fundamental design principle of the EGS and was specifically

included by the Government in the legislation passed by the Parliament implementing

the Diesel and Alternative Fuels Grants Scheme (section 4 of the Diesel and

Alternative Fuels Grants Scheme Act 1999).

The Treasurer also noted that the inquiry will not consider options that involve

long-term real increases in the effective level of diesel or petrol taxes paid

by business or private consumers.

Timing and administrative arrangements

The Government announced in the 2001-02 Budget that the inquiry would be supported

by a secretariat located in the Department of the Treasury, with funding of

$4 million in 2001-02.

The secretariat will comprise officers from various Commonwealth agencies and

will be headed by Mr Nigel Bailey, until recently the General Manager of the

Treasurys Indirect Tax Division.

The inquiry will report to the Government in March 2002.

A fuel inquiry website will be available from next week with details of the

inquiry and the terms of reference. The address for the web site is http://fueltaxinquiry.treasury.gov.au.

Any questions regarding the inquiry should be directed to:

Secretary

Fuel Taxation Inquiry

C/- Department of the Treasury

Langton Crescent

PARKES ACT 2600

email: fueltaxinquiry@treasury.gov.au.

CANBERRA Contact: Carolyn Coleman (0409) 438 680

8 July 2001 Niki Savva (0418) 868 710

Terms of Reference

1. The inquiry is requested to examine the total existing structure of Commonwealth

   and state taxation of petroleum products, and petroleum substitute products,

   particularly for transport and off road use (but not for commercial electricity

   generation) and related rebates, subsidies and grants, including the proposed

   Energy Grants (Credits) Scheme and other fuel related measures proposed as

   part of Measures for a Better Environment.

2. The inquiry will not impact upon the governments commitment that the Energy

   Credits Scheme will maintain benefits equivalent to those available under

   the Diesel and Alternative Fuels Grants Scheme and the Diesel Fuel Rebate

   Scheme.

3. Further, given the governments concern about the impact of high world oil

   prices, the inquiry will not consider options that involve long-term real

   increases in the effective level of diesel or petrol taxes paid by business

   or private consumers.

4. The inquiry will report on:

1. The effects on the efficient allocation of resources, taking into account

   the pivotal role that petroleum products play in economic activity; environmental

   outcomes, including in relation to transport; and as an input to production

   more generally;

2. The interplay between fuel taxation and related issues such as petroleum

   pricing, cost structures and marketing arrangements with particular attention

   to the effects on competition (in particular, access to supply) and the efficiency

   and international competitiveness of Australian industries.

3. The options available to the government to reduce or eliminate any adverse

   effects reported under (a) and (b) above, including any anomalies or inequities

   arising from the existing arrangements for industry and consumers;

4. The options available to the government to reduce the cost or improve the

   effectiveness of the administration of the existing and proposed arrangements;

   and

5. Implementation strategies for options identified under (c) and (d) above.

1. The inquiry should have regard to the impact of existing arrangements and

   proposed changes on:

1. The overall economic performance of the Australian economy, including promoting

   domestic competition and international competitiveness;

2. Fuel suppliers, downstream industries and consumers;
3. The welfare of regional, rural and remote communities;
4. Externalities associated with transport;
5. The use of fuels that would deliver better air quality and contribute to

   greenhouse objectives; and

6. The flexibility and sustainability of government revenue.

The inquiry should take into account the governments wish to achieve overall

budget neutrality in relation to petroleum products in its recommendations.

The existing income tax arrangements affecting petroleum producers and distributors

and excise on the production of crude oil are excluded from the scope of the

review.