Federal Budget revenue lost because of petrol tax freeze hits $25 billion
JOHN Howard's decision to freeze petrol tax in 2001 has cost the federal budget $25 billion over the past 11 years.
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JOHN Howard's decision to freeze petrol tax in 2001 has cost the federal budget $25 billion over the past 11 years.
And it will cost a further $23 billion over the next four years - enough to help pay for the national disability insurance scheme.
Figures provided to the Herald Sun by Deloitte Access Economics partner Chris Richardson reveal the revenue lost because of the petrol tax freeze has reached almost $5 billion a year.
Petrol tax would be 15c a litre higher today and it would cost motorists about $9 more to fill a typical 60 litre tank if the excise had continued to grow in line with inflation - as is the case for beer, spirits and tobacco.
Mr Richardson said freezing petrol tax was a "pretty dumb policy and a costly one at that". "We have all these demands on the budget and we have a tax system that is not up to it and this is one of the reasons," he said.
Mr Howard froze petrol tax at 38.1 cents a litre in the lead-up to the 2001 election when he faced political pressure over the introduction of the GST and the impact of the fuel tax.
At the time the measure saved motorists 1.5 cents a litre and cost the budget $555 million.
Tax Institute senior tax counsel Rob Jeremenko said the Government should look at reintroducing indexation of petrol tax so it would rise in line with inflation.
"The decision to freeze indexation back in 2001 just shows that policy decisions made in isolation can cause real big dollar structural problems down the track," he said.
"In terms of the budget, that's one of the most short-sighted political tax decisions in the last decade."
Mr Jeremenko said the GST rate and base should also be "up for consideration in the context of broad reform".
He said changes to the GST could allow for state stamp duties to be abolished and "that would be good news".
The Federal Government has ruled out changing the petrol excise or GST.