SUBJECTS: Interaction of GST and excise on petrol prices
JOHN MILLER:
G'day Chris
CHRIS BOWEN:
G'day John. How you doing?
JOHN MILLER:
Good. Chris how seriously should we be taking the hints dropped quite soundly by the Treasurer at the weekend, that this is something that's actively under consideration?
CHRIS BOWEN:
The context to this John is: the Treasurer announced a major tax review on Budget night. The day after the Budget we said that one of the things this would look at is the interaction between the GST and the excise; because some people in the community rightly pointed out that this is a tax on a tax, and to reassess weather it's the right way of doing things. Now can I say this is one of hundreds of things that the big review of taxation will be looking at. There is a lot of water to go under the bridge and it would be very expensive, as I said the day after Budget day, this would be a very expensive measure and you could only do it in the context of a whole review of taxation; you wouldn't do it as a one off as the Opposition did on their policy last week. That's the context John; and it's simply saying, if you're going to have a complete review of the tax system, this is one thing that would need to be looked at.
JOHN MILLER:
This is the point Anna Bligh was making when I spoke to her a few moments ago. She said her Treasury people are telling her, if the GST comes off the excise, that's going to leave them, I think she said, something to the effect of $30 million a year short. She said that's a lot of nurses and hospitals et cetera.
CHRIS BOWEN:
I'm not sure how it would affect each State. We haven't done that analysis, but it clearly is a lot of money and agreement with the States would be necessary for any change to the GST. But the terms of reference released by the Treasury made it clear that the tax review would look at excise and look at different matters; and we just clarified that if that includes the operation of the GST on excise it would be very expensive and you would need to question whether that's the right way to go. That's what the Review is for: to put all those issues on the table.
JOHN MILLER:
If we did take the GST off the excise component of the price of a litre of petrol how much would it save us at the bowser?
CHRIS BOWEN:
3.8 cents a litre.
JOHN MILLER:
3.8 cents a litre?
CHRIS BOWEN:
3.8 cents a litre.
JOHN MILLER:
It's not a lot, but its better then a poke in the eye with a blunt stick.
CHRIS BOWEN:
Well you know what they say: that we should make sure that people aren't paying one cent more then they need to; and that's why we've embarked on a range of measures: the Petrol Commissioner, the increased powers to the ACCC, FuelWatch.
FuelWatch for example, the evidence shows, will put downward pressure on petrol prices by about 2 cents a litre; which is in the greater scheme of things, not a huge amount, but every cent counts. And we would do that for about $20 million over 4 years. This (removing the GST off the excise) would be a much, much more expensive way but it is something that gets raised regularly in the community. In fairness, when the previous government put the GST on the excise they did reduce the excise at the same time so that the net effect wasn't to increase petrol prices, to be fair about that. But it does get raised in the community quite often: 'why do we have a tax on a tax?' Well this is a good opportunity to review that, put all the arguments on the table, in consultation with the States and take it from there.
JOHN MILLER:
So let's just clarify that again, can we Chris? The cost of the product is 93.2 cents, that's the cost to make the stuff. Excise, the tax take is 38.1 cents; the GST is 13.6 cents; total tax is 51.7 cents; retail margin 4.7 cents. So still on the total taxes, they provide a whopping amount of the money that we are paying for fuel and that, of course, as often pointed out to people, rolls right through the entire economy. If it's only going to save us 5 cents a litre what happens to this? Is that just because the excise is only part of the GST, it's only coming out of the excise tax take, not the overall price?
CHRIS BOWEN:
That's correct. What's being looked at is, the GST on the excise, that's one thing the committee is looking at; not the complete GST on petrol because that would be a much, much bigger amount of money and would be a considerable impost on State budgets, which we just wouldn't do. But the GST on the excise is something which the committee can have a look at.
JOHN MILLER:
Given that the community is bleeding, small business is bleeding, truckies are bleeding, how long are we going to have to bleed?
CHRIS BOWEN:
What people can be reassured of John, is that we are doing everything we can in our power to put downward pressure on petrol prices. This is very important in the Government, from the Prime Minister down; and we are acutely aware of what pain it's causing. The pain's caused by world prices, which flow on through to Australian petrol prices. Now we've never said, in Opposition or Government, that any Government can stand in the way of big increases in world oil prices; what we can do is introduce more transparency, more competition and that's what we're actively pursuing to put downward pressure on prices.
JOHN MILLER:
Alright Chris Bowen, thank you very much for talking to us this afternoon. When are we looking at an outcome of this review do you think?
CHRIS BOWEN:
The review won't report for some time. There will be working papers and working documents and the Government won't stand still in the mean time, but the review won't be out until next year.
JOHN MILLER:
Assistant Federal Treasurer, Chris Bowen, thanks for talking to us this afternoon.
CHRIS BOWEN:
Thanks John.