The Minerals Council is wrong about fuel tax credits
by Marion Terrill, Natasha Bradshaw
The Minerals Council would have you believe that the Grattan Institute’s proposal to fairly tax businesses for the true costs of their fuel use will destroy businesses and jobs and cause the cost of living to skyrocket. These claims are wrong. Here’s why.
First, the Minerals Council claims to be most worried about the agricultural industry and small businesses, rather than the large mining companies it represents.
But our Grattan report shows that in 2020-21, the mining industry claimed a whopping $3.4 billion in fuel tax credits, almost four times that of the agricultural industry it is so worried about. Just 10 of Australia’s largest mining companies, seven of which happen to be members of the Minerals Council, claimed more than $1.7 billion in 2020-21, while many smaller businesses did not claim credits at all.
And let’s not forget that many of the small businesses we all rely on to fix our plumbing, drive us around and deliver our packages already pay the full rate of fuel tax.
This unfairness in the fuel tax system has for many years put them at a disadvantage against businesses that receive the tax credit.
As for the “stark consequences” for consumers and export businesses, these claims are wildly exaggerated.
We’ve crunched the numbers. Our proposed reform package would cause the price of an average $100 grocery shop to increase by just 35 cents. And this is only if businesses fully pass on to their consumers the small cost increases to freighting goods and producing agricultural products such as meat, dairy, fruit, and vegetables. We calculate that for most types of businesses in the five industries that receive almost all of the fuel tax credits, the average increase to operating costs will be less than half of one per cent and at most about one per cent.
The suggestion that such small increases could “lead to the shutting down of businesses and job losses in critical export industries” is completely overblown.
The average fuel price increased by almost 50 cents a litre between 2021 and 2022, more than double our proposed increase, and yet our export industries continue to operate.
And the advantage our export industries enjoy from facing a low carbon price also has a use-by-date and they know it. Nearly all OECD countries have committed to net zero emissions by 2050 and several major markets, most notably the European Union, are adopting or planning to adopt policies that will force overseas producers to face the same carbon prices as their local producers, if they want to access their large market.
Mineral Council members that receive large fuel tax credits, including Rio Tinto, BHP, and Newmont, know these policies are coming.
They tell it to their investors by factoring in ‘internal’ carbon price of more than $100 per tonne into their investment decisions – more than the $75 we propose. Our proposal is to cut in half the $8 billion a year in fuel tax credits given to businesses, to help repair the budget and reduce carbon emissions.
Our report shows that only about half the outlay is justified in economic or social terms. Yet the Minerals Council wants to protect the present unfair system.
The choice for Australian taxpayers is simple: continue to give $4 billion a year in unjustified tax breaks to big business or gain $4 billion a year to be spent on services such as new and improved roads, hospitals, and defence – or on reducing interest expenses on our government debt.
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