The long-awaited final report of the Henry tax review has suggested a fundamental shift in road tax arrangements to better manage demand on our congested roads.
But there's been no immediate response from the Federal Government to the report’s comments and recommendations on road transport taxation.
Chapter 8 - Enhancing social and market outcomes - of the Final Report: Part 1 - Overview advocates a shift from ‘indiscriminate taxes’ to ‘efficient prices’ to leverage the value of our road infrastructure.
The report says efficient pricing is key to reducing congestion by better managing road demand.
Echoing Roads Australia’s own long-term agenda, the report also points to the need for better linking of investment decisions with the needs of road users.
The text of section 8.1, Road transport taxes, is as follows:
Current road tax arrangements will not meet Australia’s future transport challenges. Poorly functioning road networks harm the amenity, sustainability, liveability and productivity of our society. Moving from indiscriminate taxes to efficient prices would allow Australia to leverage the value of its existing transport infrastructure. Less congested roads, shorter travel times and investment in road infrastructure that addresses user demand would provide a foundation for further productivity growth, improved living standards and more sustainable cities.
There are large challenges facing transport in Australia. In particular, under ‘business as usual’ assumptions, the avoidable costs of urban congestion may grow to around $20 billion in 2020. This cannot be reduced simply by building more city infrastructure, as most new road space induces new traffic. Helping to manage road use, through efficient prices, provides the best long-term approach to reducing congestion.
If fuel tax is used as a variable road charge, it should apply to all transport fuels. Equally, fuel taxes should not exceed the levels justified by broadly defined social costs of use (whether of roads or environmental costs).
In major cities, location-specific congestion charges should vary according to the time of day. City roads would be less congested during peak periods, with travel at higher speeds and shorter travel times, saving time for road users, reducing vehicle costs and greenhouse emissions. The revenue from congestion charges on existing roads should flow back to the community, initially to finance public transport in affected areas.
Heavy vehicle charging would ensure that individual trucking operators pay their own specific costs, no longer cross-subsidising or being subsidised by other operators. Truck operators would have incentives to avoid route choices and vehicle configurations that cause the highest costs, but would have access to roads and bridges they are willing to pay for. Revenue from road-wear would directly fund road owners’ maintenance.
In addition to helping manage demand for transport, reforms could be considered to ensure that spending on roads matches anticipated need. This should be determined according to strategic planning and comprehensive and transparent benefit-cost analysis. This would help ensure new roads are built where needed, and roads are maintained to minimise total life cycle costs, including costs to road users. Road users with specific needs could enter commercial agreements with road suppliers.
Existing institutions have not led to the most efficient use and supply of roads. Prices are essential to making the best use of roads, but they must be coupled with improved governance that better serves the needs of road users, now and in the future. New investment based on economic criteria and accountability for investment decisions would help ensure that roads are constructed and maintained in accordance with future needs.
The specific recommendations of the Henry review that relate directly to road transport taxes are found in Chapter 12 (Section E3, pgs 92-93) of the Overview. They are as follows:
In the Federal Government’s response to the Henry report, also released yesterday, there appears to be no specific mention of the section and recommendations on road transport taxes.
The Prime Minister and Treasurer’s joint media statement lists 27 recommendations (or potential mis-interpretations of recommendations) that they say the Government will not implement at any stage - among them a recommendation to index fuel tax to CPI (Recommendation 65).
Seemingly, the other road transport tax recommendations fall within the sweep of the Government’s statement that “...other recommendations in the review are not government policy. We have called for a mature tax debate and expect the other recommendations to be subject of much debate in the coming years.”
The Henry tax review provides a generational opportunity to wipe the slate clean and come up with a new deal for transport infrastructure funding, planning and management in Australia, says Roads Australia.
The Henry review findings on road pricing, governance and investment accountability are a welcome contribution to the debate about transport infrastructure planning and funding.
“There’s no doubt we must have a system that better reflects the true cost of accessing our road network, and at the same time provides a dedicated source of funding for capital works and maintenance,” says RA President, Ray Fisher.
“We need greater public transparency in the charges that road users pay, and stronger links to the benefits they receive.
“The Henry review advocates a much stronger link between investment decisions and value to road users, and this is a view long held by Roads Australia.
"If we’re going to talk about better ways to price and fund transport, it needs to be in the context of a much bigger debate on the planning and management of transport infrastructure. The Federal Government now needs to take the bull by the horns and work alongside all levels of government on a process of constitutional and administrative reform of how we plan, fund, deliver, operate and maintain our transport infrastructure.”
Mr Fisher says the current public administration and funding regime no longer meets national needs in terms of efficient and effective infrastructure planning, equity between stakeholders, and the meeting of challenges like congestion.
“Notwithstanding initiatives like Infrastructure Australia, we still have a fractured approach to decision-making and little co-ordination in revenue raising,” he says.
“Currently, local and state governments have the principal responsibility for delivering our transport system, but the least ability to fund or plan them independently.
“Moreover, the system is beset by inequities in the way different transport users are charged and funding is raised.”
Mr Fisher says governments have shown a genuine willingness to work together through the COAG national reform process.
“It’s encouraging to see governments working together more closely than ever before. But in terms of an overarching, national consensus on transport infrastructure funding, planning and management, they need to take it a step further and a step faster,” he says.
“We hope the Henry tax review will be the catalyst for this to happen.”
Mr Fisher says the debate about pricing mechanisms shouldn’t be a distraction from some of the other pressing issues on the industry agenda, like road maintenance and renewal and opportunities for greater private sector involvement in road planning and management.
“”We’re fast approaching a crisis point in terms of our aging transport infrastructure. We’re simply not keeping pace with the road maintenance and renewal task,” he says.
The Federal Government has committed some of its tax take from the proposed Resource Super Profits Tax to a new ongoing infrastructure fund that it says will kick off with $700 million in 2012-13.
The Government says the funding will be distributed “in a manner which recognises that resource-rich States face large associated infrastructure demands.
“Resource‐rich States will receive relatively more funding which can be used to support investment in infrastructure, including that necessary for the development of the resource industry."
The Government also says the fund will deliver resources to the States when they are needed — as projects are built.
“The States will not have to wait until projects are complete and production comes on line for infrastructure resourcing to flow.
The details of the fund will be settled through negotiations with the States."
Submitted by Mark Bowmer on Sunday May 2nd 2010 10:21pm
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