BY SUE BOLAND
Queensland Premier Peter Beattie created a media furore on August 20 when he called for an inquiry into the impact of the GST on petrol price rises. With petrol prices having leapt to over $1 a litre in places, Beattie's comments unleashed a wave of criticism on the federal Coalition government.
Prime Minister John Howard and treasurer Peter Costello responded by shifting the blame. It's not the GST, they cried, it's world oil prices.
But while world prices are partly responsible for the rise, that's not the whole story.
According to a new report by Econtech, an economic modelling agency used by the government and the Australian Competition and Consumer Commission, the GST has already added 1.2 cents to the price of a litre of petrol.
Earlier this year, Econtech's modelling was used as evidence by the government that the GST would not increase petrol prices. However, the agency based that prediction on the assumption that the government would decrease excise tax by an amount sufficient to cancel out the impact of the GST.
"If this assumption is not met, the specified price change targets will be exceeded", Econtech warned.
Motoring organisations announced at the end of August that they would campaign for the petrol excise tax to be frozen. Several Coalition backbenchers have joined the call for a freeze petrol excise.
The ALP failed to support calls for petrol excise to be frozen, but did call for the next scheduled increase to be reduced, in order to compensate for the GST's impact.
Howard, Costello and National Party leader John Anderson, however, ruled out freezing the excise and rebuked Coalition MPs who were calling for a freeze.
Some Coalition backbenchers refused to be silenced. South Australian Liberal MP Trish Draper announced on September 1 that she would continue distributing a petition for a freeze on petrol excise, and Western Australian Liberal Senator Ross Lightfoot has continued to speak out.
The political storm over the price of petrol threatened to engulf the government. Howard needed to do something urgently to distract public attention. A few days later, he declared that the government would withdraw cooperation from the UN human rights committees.
The tactic was successful. Discussion about petrol prices vanished from the front pages of newspapers.
An extended public discussion about petrol prices would have exposed the government on two fronts.
Firstly, a public discussion would reinforce the impression that you can't trust the government on anything. During the 1998 federal election campaign, Howard promised, "The GST will not increase the price of petrol for the ordinary motorist".
When Costello let on in February that there were "limits to that promise", Howard immediately gave an "absolutely irrevocable" guarantee that petrol prices would not increase with the GST. The government betrayed the promise in August when, instead of cutting the excise tax by the 8.2% necessary to cancel the impact of the GST, it cut the rate by only 6.7%. This difference sparked an immediate increase in petrol prices.
Secondly, an extended public debate would reveal that the government has the power to cut the price of petrol by almost half, but refuses to do so. Excise accounts for 47.2% of the price of each litre of petrol. Since Bob Hawke's federal Labor government introduced automatic indexation of excise in 1983, it has increased from 12.2% to 47.2% today.
Howard claims that it is not possible to freeze, let alone reduce or abolish, excise tax because the funds are needed for pensions and social welfare. That concern has not stopped his government from cutting the company tax rate to 30% or from slashing the capital gains tax rate in half.
The federal Coalition isn't the only hypocrite on petrol prices. The ALP has repeatedly refused to commit a future Labor government to lowering excise. It is content to posture.
Throughout the furore, the Democrats have supported the government. They are particularly sensitive to suggestions that the GST is responsible for petrol price increases because of their role in the adoption of this consumption tax. Democrats' press releases call on Australians to accept high petrol prices and focus on adjusting "our economic and household behaviour to that reality".
Excise taxes are inherently unfair because they fall most heavily on those who can least afford to pay, the ordinary worker who needs a car to survive. Like other indirect taxes, excise taxes should be abolished.
Many environmentalists would oppose the abolition of fuel excise taxes as a windfall to large mining and trucking companies. However, it would be more effective to hit these companies with increased company taxes, the abolition of their subsidies and the abolition of their tax evasion schemes.
This is a concept which is anathema to the Liberals, the Nationals, Labor and the Democrats.
The most recent aggregate figures available from the Australian Taxation Office, for 1995-96, show that companies paid an average of 18.8% on their "taxable income", despite the official tax rate being 36%. If all companies had paid 36% tax, it would have raised an extra $15 billion. The 2000-01 budget predicts that $12.9 billion in revenue will be raised from petrol excise.