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Wednesday, 31 May 2000
Page: 16756


Mr ANDREWS (10:25 AM) —It is, of course, always easy to allege that something should have been done before. It is the role of oppositions, I suppose, to find fault at some level, even when they are in basic agreement with what needs to be done, as is the case with the Petroleum Excise Amendment (Measures to Address Evasion) Bill 2000 which we are debating today. Nevertheless, it is good to have bipartisan support.

As oppositions know from their experience of government, issues are rarely straightforward and solutions are not preordained in stone. I say to the honourable member for Burke, in relation to the comments that he made, that if he believes that this is something which state governments such as the Bracks government in Victoria can do something about, perhaps they ought to be turning their attention also to the role of independent fuel suppliers, service stations and garages which often find themselves squeezed—one suspects often deliberately—by major oil companies. If one wants to achieve a situation where fuel prices can remain at reasonable levels, then some competition from independent operators is desirable.

Fuel substitution has been a significant problem for many years. This has been historically due to the fact that excise on petroleum products has been levied at different rates, depending on their intended use. Fuels for on-road use have been levied at higher rates compared with those used for non-road purposes, such as heating, and products such as solvents do not attract any excise. Over the years Australian governments have tried various piecemeal ways of dealing with the problem. Such efforts began as long ago as 1993, when I seem to remember that a Labor government was in power. The Howard government made further efforts to deal with substitution in 1997. Each time, the racketeers have taken advantage of another loophole.

Toluene is normally present in small quantities in leaded and unleaded petrol at about 10 per cent of volume. The latest scam has involved the diluting of petrol with anything up to 60 per cent of toluene, the solvent used in paint. By using toluene, distributors have been avoiding the 44c petrol excise and ripping off consumers paying pump prices. The government needed to address a real danger to the lives of motorists and to the health of their vehicles. The use of solvents added to petrol can melt rubber seals in the fuel system, so increasing the risk of fire in an accident, and it can reduce performance. At high levels, the substance can lead to the rough running of engines, ignition problems and poor fuel economy.

Of course, not everyone will be happy. The paint industry uses these substances for non-fuel purposes. I understand that the concern of the Australian Paint Manufacturers Federation is that the proposed rebate system `would leave companies with cash shortfalls and increase prices'. The Australian Automobile Association has also called for regular monitoring of fuel quality at service stations, arguing that this is how the New South Wales Department of Fair Trading was able to uncover the current tainting racket by testing samples from service stations in Sydney.

The government has decided not to go down this road again. The 1997 reforms were designed to assist the detection and prosecution of offences. In fact, there has only been qualified success in bringing about prosecutions for unlawful evasion of duty, claiming of rebates and so on. At the time of the hand-over from Australian Customs to the Australian Taxation Office, Customs noted that `establishing proof of offences under the Fuel (Penalty Surcharges) Amendment Act 1997 has proven to be more difficult than expected'. However, the Australian Institute of Petroleum has acknowledged the need for across the board action, stating:

Wider reform is [needed] to stop the problem from recurring in the future ... the best way to stop these scams ... is to remove the incentive to blend fuels by introducing uniform excise rates across all relevant petroleum products.

So this is what the government has decided to do. The government has not dropped the ball, as the member for Wills alleged last night; rather, it has picked it up and is running with it. The member for Wills stated that the opposition had raised the issue in March. May is only just ending, so I would have thought that that was an argument for the celerity of government action. This measure will also protect the revenue of the Commonwealth, which has lost an estimated $500 million in revenue due to this scam. I believe that the government is to be congratulated for taking a tough stand on fuel substitution. I commend the bill to the House.