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Assistant Treasurer discusses petrol prices; and interaction between GST and excise.



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INTERVIEW WITH ALI MOORE

JOHN FAINE SHOW - ABC RADIO MELBOURNE

MONDAY, 26 MAY 2008

SUBJECTS: Petrol prices, interaction between GST and excise

ALI MOORE:

The Government has typically done all it could to help with higher petrol prices, now it says it is going to consider cutting the GST on fuel. Assistant Treasurer Chris Bowen, good morning.

CHRIS BOWEN:

Good morning Ali, good to talk to you again.

ALI MOORE:

Can you tell me exactly what you’re proposing - is it to cut the GST on fuel full stop, or is it to cut the GST on the excise component of the fuel cost?

CHRIS BOWEN:

Sure. Look, the context of this is - a fortnight ago, I was asked at a press conference ‘would you consider, in the Henry Review of Taxation, looking at the interaction between GST on fuel and the GST excise’. So the tax on a tax, as many people in the community would characterise it, and I indicated ‘yes’, the Government had indicated to the Henry review that that is something they should have a look at. Now, as I say, this was a fortnight ago and those comments were repeated in the paper yesterday, just as a direct quote from that press conference a fortnight ago. So what this is, we’re simply saying - we’re having a full review of the tax system. This is something which does cause some angst in the community, that the GST is imposed after the excise and therefore the inquiry would have sensibly and rationally, in a fully-funded and costed manner have a look at whether that continues to be appropriate.

ALI MOORE:

But isn’t it just the tax on the tax that you’re looking at removing? If I can give you some numbers that were quoted in the morning papers this morning; if you take the average price of petrol on the weekend, if you just take the GST off the excise, it’s something like just 4 cents a litre difference.

CHRIS BOWEN:

That’s correct.

ALI MOORE:

Is that big enough to make a difference? I mean you’re saying that the Opposition’s plans to cut the fuel excise by 5 cents won’t make a difference.

CHRIS BOWEN:

Well what we’re saying is that it’s a very expensive way of making a difference and I said that at the press conference as well. Look this is expensive…

ALI MOORE:

You actually said it would be irresponsible as well.

CHRIS BOWEN:

I said it would be irresponsible to do it, in and of itself, in isolation to a full review, is what I said. That is exactly what we’re doing - a full review of the tax system and it would sensible to have a look at whether the GST being imposed after the excise continues to be fair. Now, in fairness to the previous Government which did it that way, I understand the excise was reduced at the same time, so that the immediate impact on petrol prices was nil. But, petrol prices are obviously a very big issue and any review of the tax system would sensibly look at the interaction between the GST and the excise. That’s all I said and that continues to be the Government’s position.

ALI MOORE:

The review could look at it, Chris Bowen, but I’m assuming that you, personally, would not be in favour of changing current arrangements?

CHRIS BOWEN:

Well, what I’m in favour of is a full review and what I’m certainly not in favour of is doing things ad hoc and on the run and promising a $2 billion a year tax reduction with no offset which would raid the surplus and reduce downward pressure on interest rates, which is what the Opposition has done, that’s the way they’ve done it. We, in contrast, have said we’ll have a full review, the GST is one aspect of petrol prices, it would be an expensive way of dealing with it, but it would be one way of dealing with it…

ALI MOORE:

How expensive? If you did take the GST off the excise, how much would that cost you a year?

CHRIS BOWEN:

Well, one of the things the review has to look at is the full cost-benefit analysis…

ALI MOORE:

But you can say it’s expensive, so you must have some idea how expensive?

CHRIS BOWEN:

Well you are looking at a very substantial amount of money over the forward estimates. You are looking in the order of some billions of dollars.

ALI MOORE:

$4 billion over the life of a term of government? Three years?

CHRIS BOWEN:

Well, you’d need to do the full analysis Ali, and that’s what the Henry review is doing. There’s no doubt it would not be cheap and it should be done in a calm, rational and responsible manner in terms of a proper review, not cobbled together as the Opposition’s plan has been. As I say, and I said this before, the Opposition had come out with their 5 cents a litre plan and what we saw yesterday was merely the repetition of those remarks in the newspaper and that for the first time some people had noticed it, which is fair enough. But, this is simply saying that the full review of the taxation system will examine the interaction.

This is one of a range of major measures that we’re looking at and we’ve got FuelWatch as our proposal which the Opposition appears to be opposing, which will put downward pressure on petrol prices by about 2 cents a litre, which is a very cheap way of doing it. It only costs $20 million over the forward estimates and gives people a whole lot more information about where they can buy cheap petrol.

ALI MOORE:

Alright Chris Bowen, many thanks for joining us this morning.

CHRIS BOWEN:

My pleasure Ali.