Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
Minister investigates ways of counteracting the substitution of toluene for petrol in order to escape excise tax.

Download WordDownload Word



JOHN HIGHFIELD: What goes into the tank of the family car is of increasing concern to Australians as the price of petrol moves towards a dollar a litre, but paying more for fuel which could damage your car is something else again. After revelations that over 40 service stations in New South Wales and Victoria have been selling fuel diluted with large doses of toluene to scam off larger profits, the federal government has decided to crack down. Amid outrage over the substitution fraud, the Prime Minister has intervened, giving his backing to the urgent implementation of a proposal to apply an excise to the substitute hydrocarbon which is normally used as a paint thinner. Assistant Treasurer, Rod Kemp, is to sound out the Tax Office on the idea later today, while signalling he’s looking at whether or not petrol substitution can be better policed. Fiona Reynolds in Canberra.


FIONA REYNOLDS: News of Sydney’s petrol substitution racket first broke on Tuesday night. It took the federal government nearly 24 hours to respond to New South Wales’ calls for action. Now, it’s full steam ahead, working with the Tax Office on ways to catch petrol stations that are diluting normal fuel with the paint thinner, toluene. The first step, though, is to stop the scam. The Prime Minister on Adelaide Radio 5DN threw his support behind one measure, taxing them into compliance.


JOHN HOWARD: The two ministers, Senator Kemp and Senator Vanstone, are examining a way of counteracting this activity, and that way is to see whether you can impose some kind of excise on the substitute that, at present, doesn’t carry excise, but you’ve got to do it in a way that doesn’t hit people who have a legitimate use of that substitute for generally paint-thinning purposes.


FIONA REYNOLDS: Toluene currently doesn’t attract an excise, unlike petrol at 44 cents a litre. By diluting petrol, distributors and retailers can make million dollar profits. Assistant Treasurer, Rod Kemp, says he is holding urgent talks with Customs and the Tax Office.


ROD KEMP: There is an incentive for unscrupulous people to use this to - I think the jargon is to ‘cut’ petrol - and so that, in effect, lowers their costs. But the Commonwealth has clearly - there are a number of responsibilities involved here, clearly that we will take every action we can to avoid people avoiding their excise responsibilities, and we will be moving very rapidly there. There is a fair trading issue which at least some of the state ministers are recognising, that the product is being sold to the public - not the product which is as described; it’s a product which contains other chemicals. So we will obviously have to work very closely with the various fair trading ministers and the states to also deal with this issue.


FIONA REYNOLDS: The Institute of Petroleum is claiming credit for the plan. Executive Director, Jim Starkey, says he suggested an excise to the government.


JIM STARKEY: We believe that’s the correct course to follow. By imposing an excise on the imported product, you effectively eliminate the opportunity for people to misuse the product. And of course, for the genuine users of the product, they would be able to apply for rebate and they would be unaffected by the proposed moves, so yes, we’re fully supportive of that initiative.


FIONA REYNOLDS: Long-term solutions are also in the pipeline. Senator Kemp has signalled he’s looking at beefing up enforcement. But the opposition claims the government axed a scheme to crack down on petrol substitution a year ago, with Customs staff redeployed to the Tax Office and equipment to detect thinners sold. Shadow Assistant Treasurer, Kelvin Thomson, is demanding an inquiry.


KELVIN THOMSON: Well, I am concerned that the government has abandoned inspection for diesel fuel substitution. These blended or adulterated fuels harm engine performance, destroy engines and pollute the atmosphere, and that this is potentially another avgas scandal in the making.


FIONA REYNOLDS: But Senator Kemp says Kelvin Thomson has got it wrong. The trucks were used to deal with another fuel problem.


ROD KEMP: The trucks first of all haven’t been sold. The trucks are there and available for use by the Tax Office.


FIONA REYNOLDS: So could these trucks be used again to monitor petrol substitution?


ROD KEMP: Those are the issues that I will be exploring further with the Tax Office, but essentially we are determined - the government regards this as a very serious problem. We are determined that we will fulfil all our responsibilities under the law to deal with it, to make sure that people do not improperly avoid their excise responsibilities. We will cut down on this. We will stop this tax rort and, as I said, we’re working with Customs to make sure that we can deal with it.


JOHN HIGHFIELD: Senator Rod Kemp is the Assistant Federal Treasurer. Fiona Reynolds reporting.