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Cautious optimism at review outcome of synfuels tax credit.



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CAUTIOUS OPTIMISM AT REVIEW OUTCOME OF SYNFUELS TAX CREDIT 2 May 2001

2 May 2001           01/170

CAUTIOUS OPTIMISM AT REVIEW OUTCOME OF SYNFUELS TAX CREDIT

Minister for Trade, Mark Vaile and Resources Minister, Senator Nick Minchin today expressed cautious optimism that a recent review by the United States Internal Revenue Service of the tax credit for synthetic fuel from coal (synfuels) would go some way to minimising the adverse impact of the scheme on the world market.

“This is a welcome step forward in addressing concerns about the abuse of the tax credit by some coal producers in the U.S.,” Mr Vaile said. “These producers were apparently claiming the tax credits simply by spraying chemicals without changing the character of the product in any real way.  This enabled them to subsidise their raw coal exports.”

Australian concerns were outlined to the review in November 2000.  A copy is available at: http://www.dfat.gov.au/trade/negotiations/submission_irc29.pdf

As a result of the review, the U.S. Internal Revenue Service will only give approval in the future for processes where the feedstock coal consists entirely of coal fines or crushed coal made up of particles no larger than 1/8th of an inch (3.2 mm). It is now clear that nearly all of the coal used as feedstock must undergo significant chemical change. 

Senator Minchin said that he and Mr Vaile would closely monitor the impact of the changes to the scheme.

“There are still a few issues that need to be clarified,” Senator Minchin said. “In particular, we need to determine the impact of the changes on  approvals given before the review outcome was announced.”

Ministers Vaile and Minchin will consult closely with the Australian coal industry on whether the clarified eligibility criteria will actually prevent abuse of the credit. 

“It is hoped that these changes will reduce the international trade distortions that were caused by the tax credit,” Mr Vaile said. “If not, we will continue to keep all options for addressing the issue under review, including action in the World Trade Organization.”

Contact:  Senator Minchin's office,  Jennifer Eddy, 02 6277 7580,  0419 432 664

Department of Industry, Science and Resources,  John Karas 02 6213 7815

Mr Vaile's office, James Baker, 02 6277 7420, 0418 273 475

Department of Foreign Affairs and Trade, Ravi Kewalram, 02 6261 1890 

CMR195-01

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