New costings from the Parliamentary Budget Office have shown that the removal of fuel tax credits and accelerated depreciation tax concessions could be worth billions in savings for the Abbott Government.
Costings show that if the Abbot Governement did abolish fuel tax credits for mining companies, this could result in a budgetary saving of $5 billion per year.
The Greens have attacked the mining industry tax breaks, as acting leader Adam Bandt said the government needs to fix the “tax distortion” that favours some industries over others.
“Taxpayers shouldn’t fork out billions of dollars each year just so the likes of Gina Rinehart can buy cheap diesel,” Bandt said.
“If the government is ending the age of entitlement, it should start at the top and axe corporate welfare instead of going after pensions or services.”
Minerals Council of Australia CEO Brendan Pearson appeared before a poorly attended Senate Committee Hearing last Thursday to argue the case for retaining the tax credit, against Greens senator Richard Di Natale.
“Every year, the Productivity Commission conducts an exhaustive
analysis of industry assistance. In the most recent Trade and Assistance Review
the Productivity Commission concluded that budget and tariff assistance to the
mining industry was ‘negligible’,” Pearson said in his opening statement.
“The purpose of the [fuel tax credit] scheme is to reduce or remove the
incidence of excise paid on a key business input. This is precisely the same
tax principle that underpins the GST.
“Higher taxes are not the answer to Australia’s budget
challenge, especially at a time when the economy is growing below trend and
mining investment is set to fall.”
A spokesperson for the Minerals Council of Australia said that the hearing on Thursday was not particularly well attended, and that it did not seem that “a great amount of progress was made”.
The Minerals Council rejected claims that the fuel tax credit is a form of subsidy, saying that fuel tax credits actually ease the administrative burden on government because it helps the mining industry build and maintain its own roads.
Diesel is widely used in all segments of the mining industry to fuel generators, heavy machinery and light vehicles, especially in remote locations.
Tax paid on the diesel used in “off-road” situations is currently refunded to companies, a scheme that has been in place for about sixty years for industries such as agriculture, manufacturing, health services, construction, as well as arts and recreation.
The Abbott Government has promised to release the costings report before budget release on May 13.