Alternative fuels taxes may be scrapped

Australian
Friday 18/7/2008 Page: 4

NEW taxes on alternative fuels including LPG could be delayed or scrapped by the Rudd Government under a compensation deal to balance the inflationary impact of its carbon trading scheme. In a separate measure, Treasurer Wayne Swan has also confirmed that the Government will continue funding an LPG vehicle conversion scheme until 2015, to help "working families" who need to travel long distances.

The Rudd Government pledged yesterday that users of liquid petroleum gas or LPG will be offered tax relief under the compensation measures, despite the fact that excise does not at present apply on it. One option is to delay or modify the planned introduction of a 2.5 cents-a-litre excise on LPG and other alternative fuels from 2011, which is set to rise to 12.5 cents a litre by 2015.

The Government has already pledged a cent-for-cent reduction in fuel taxes to compensate for the impact of the carbon trading scheme with a reduction in excise the most likely measure. But the fact that excise is not currently applied to LPG, which generates 10 per cent less greenhouse gas emissions on average than petrol, sparked fears this week that the price would rise under a carbon trading scheme without relief for motorists. But Climate Change Minister Penny Wong said relief would be offered and the precise mechanism would be determined.

The principle to our commitment to motorists in relation to fuel, to petrol, applies also to LPG. However, we will need to consult with the industry about what the best way to deliver that will be," she said. The most likely option is to delay or scrap the planned introduction of excise on LPG in 2011. The Howard government had planned a phased introduction of excise on the alternative fuels from 2011, beginning with a 2.5 cents-a-litre impost rising to 12.5 cents a litre by 2015.

But Mr Swan's office confirmed yesterday that the planned hike to LPG taxes was now classified as a measure announced by the previous government "for which a final decision has not yet been reached." The Government's taxation review, headed by Treasury secretary Ken Henry, is also considering the proposed excise. Despite speculation in the leadup to the May budget that the Government might scrap the LPG vehicle scheme's $2000 grant offer to the cost of converting new cars that use petrol or diesel to LPG, Mr Swan extended funding for the scheme.

In a letter to the Australian Liquefied Petroleum Gas Association, obtained by The Australian, Mr Swan also confirmed after the budget that the Government was now committed to the scheme through to 2015. "The Government recognises that some families need to travel long distances and that helping to mitigate some of the costs of converting to LPG allows families to take advantage of lower LPG prices," he said.

"The scheme will continue until 2015." LPG Australia chief executive officer Stephen Woodward said he was not overly concerned with any lag between the planned introduction of a carbon trading scheme and the application of excise to LPG in 2011. "They've probably got it in their minds that by the time we start putting a carbon tax on LPG the excise on LPG will apply and they are probably thinking they have 2.5 cents a litre in excise to play with," he said.

For the average Australian motorist who cannot afford a Toyota Prius, converting their existing car is the biggest single thing they can do to reduce their emissions. We're confident the Government recognises that."