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Wednesday, 31 May 2000
Page: 16770


Mr MARTIN (11:35 AM) —It is a pleasure to speak in the Main Committee this morning on the Petroleum Excise Amendment (Measures to Address Evasion) Bill 2000 and to raise a number of issues which clearly are of concern to my constituents in Wollongong.

Fuel substitution simply is a methodology employed by unscrupulous service station proprietors to avoid tax. I think that is the most simple description of exactly what takes place by those unscrupulous operators who seek a way to avoid their tax responsibilities. Fuel being substituted with paint solvents such as toluene, among a number of other products, does not attract the tax excise that petrol does. As a consequence, it is a classic example, again, of unscrupulous people in the broad community looking at ways to skate around their taxation obligation. Regrettably, this particular practice became more and more widespread as the perpetrators of these particular schemes realised that the Australian Taxation Office had ceased to conduct random testing.

The honourable member who spoke in this debate a moment ago talked about the fact that the Australian Taxation Office ceased testing for this type of activity and, as a consequence, it had long-term ramifications. He also went on to talk about fuel substitution and problems of contaminated fuel in the aviation industry. I will make one brief comment about that later. What he highlighted was the fact that this was a practice that was able to spin out of control because the government had failed to honour commitments about continuing testing. So the question has to be asked about the priorities within the Taxation Office in looking at the ways in which their obligations are to be met because the implication of their not doing that was to compromise safety for people who were driving cars that subsequently were affected by contaminated fuel.

In terms of the aviation industry, which my colleague referred to as well, clearly the concerns there were even more acute and more important, because an aircraft carries a lot more passengers than a private vehicle. Any accident caused by fuel substitution would have had devastating consequences. It comes down to the fact that somebody had taken their eye off the game. It comes down to the fact that, for whatever reason, the Taxation Office was no longer carrying out its obligations to the Australian travelling public and that, by definition, a number of fly-by-nighters operating some of these questionable service stations around Australia were getting away with not only abrogating their responsibility in terms of taxation but, importantly as well, potentially putting the lives of their customers in danger.

It is also worth noting that fuel substitution damages vehicles. I think this is one of the issues which a lot of people have perhaps not paid a great deal of attention to. It is simply bad for engines. Some engines today are highly complex, computer driven and micro-chipped. I understand this is particularly so in the case of foreign vehicles, and European cars in particular. So it becomes a costly issue for consumers as well. To take one car, the Golf, as an example, it runs on premium unleaded. European cars, because of substituted premium unleaded, attracted the greatest benefit for the rorters. As a consequence, because of the expensive repairs that were required for these cars, the consumers suffered again, and it was something over which they really had no control.

We in this parliament are responsible for ensuring that fuel substitution does not occur. It is there in the acts. It is a responsibility of the federal government. As I said a little earlier, the process of conducting spot checks for some reason was dropped off. It is a bit like, I suppose, the Minister for Aged Care and her commitment to conducting spot checks in nursing homes: that dropped off as well. As a result, the government has also forgone considerable tax revenue. On the ATO's own admission, this figure is about $100 million. So a minimum assessment is that $100 million of tax revenue has been forgone because of not conducting the spot checks, not doing what they were supposed to do.

This government has promised on many occasions no new taxes and no increases in taxes. Here is another tax opportunity that was in place, yet it has been prepared to forgo $100 million while at the same time instituting this great revolution, this great reform of the Australian taxation system with the introduction of the GST. Perhaps some of those people at the tax office are a bit overloaded with work in having to worry about the implementation of the GST. Perhaps they were more concerned with the figure of $420 million, which I think the estimates process has been able to find has been spent by this government in the propaganda campaign—the Joe Cocker type of songs.

Maybe what we should have been doing with the tax office is conducting an education campaign on fuel substitution. Maybe we could have had a song for the fuel substituters. Maybe we could have had a campaign out there with some catchy little tune that people involved in this racket could have twigged on to and the consumers would have known about. I can suggest a few. Ted Mulry's Jump in My Car—that was an oldie but a goody. Paradise by the Dashboard Light by Meatloaf—now there's a cracker, if ever I heard one; I think that takes people's memories back. What about Little Deuce Coupe, by the Beach Boys? I am sure there could have been some sort of a campaign designed around that. At the end of it, though, the best one is probably the old Who favourite Substitute. You could have changed some of the lines in there to fit just exactly what this practice is all about: a substitute ripping off the Australian tax system, ripping off the Australian public and, at the same time, creating dangers for consumers because of the practice causing problems with engines of cars.

Unfortunately, as a result of this practice going unchecked for quite some time, a lot of service station operators suffered a significant drop in sales. My colleague talked a moment ago about the effect on small business of this sort of practice, and it is true. If you look at the fuel industry these days, most people operating in the industry as service station proprietors are, indeed, not proprietors; all they are are lessees or they are operating on behalf of the major oil companies. As a consequence, they must ensure that they do everything they can to maximise the clientele coming in the door; otherwise the revenue stream they have will drop off.

In this instance, it was the larger franchisees who suffered the most. This was because their fuel was provided by agreement by the supplier whose brand is represented on the premises and there has been little scope to shop around for other bargain deals from smaller independent suppliers. I think that was one of the problems. The fly-by-nighters could go and do a bit of shopping around and get a cheap fuel, substitute toluene and other things for the fuel and therefore contaminate what was being sold to consumers around Australia, abrogate their responsibilities in the tax system and, at the same time, cause problems for consumers. But the larger franchisees could not do that because of the agreements that were struck with the Mobils, the Shells and the other major fuel suppliers, so there was little scope to shop around for bargain deals. Therefore, it was difficult to compete with the small unaligned or independent operator up the road who could continually undercut them.

I know in my own area of Wollongong that people brought to my attention from time to time a similar sort of problem. When one went to engine reconditioning people in Wollongong and asked them whether or not there had been a surge in cars being brought in because of engine problems, the answer was yes. When questioned further as to what sorts of cars were coming in and what was the cause of it, it did not matter necessarily what sort of car but the cause of it was that they had gone to a few of these small service stations operating as independents, non-aligned, and had bought fuel which was contaminated. And, over time, it had caused the problem and created unnecessary expense for consumers because of the difficulties experienced in the engines.

It is well known that proprietors in some of these service stations—the genuine people out there trying to make a living—were not making great profits from the sale of fuel. In fact, I was told by someone I know quite well that her brother had said that while this particular practice was going on he would probably have gone broke had it not been for the carwash and the video sales and rental business that were part of his service station. He obviously had one of these fly-by-nighters just up the road from his operation.

How did it all go so wrong? I do not think the Treasurer is entirely to blame, despite what my colleague said just a moment ago. He is out at the forefront, there is no doubt about that, but I have to say the Assistant Treasurer, Rod Kemp, has a little bit of the blame here as well. This particular racket was brought to Senator Kemp's attention some 18 months before the story broke in March of this year. It was brought to the minister's attention by Liberty Oil. And in March the senator played dumb by claiming it was the first time the toluene issue had been brought to his attention. Liberty had been talking about it for quite some time and he did not realise that toluene was a solvent. He had only heard about substitution with solvents before this, but did not realise that was the whole basis of the problem.

There is no legally binding standard that governs the content of petrol and, therefore, prosecution will always remain difficult. Really, the legislation that is before us just ensures that the government receives its excise revenue. The minister literally was asleep at the wheel. He has offered regrets rather than acting when he should have some 18 months ago.

And it was not just 18 months ago that this issue was raised again and again. In fact, in a media release from the New South Wales Minister for Fair Trading, John Watkins, dated 29 February of this year, he named a number of these fly-by-night service stations in Sydney. Indeed, I suspect some were probably close to the electorate of my friend and colleague the member for Lowe. The minister went on to say that he had been telling the federal government about this issue for some time, but because it is a federal government responsibility, the state government, through the Department of Fair Trading, could do nothing other than publicise the problems and warn consumers. The actual closing down of this particular sort of operation rested with the Commonwealth government. Mr Watkins pointed this out and said he had been talking to the Assistant Treasurer, Senator Kemp, for some time, but still no action had been taken.

So what is this and other related legislation, what does it do and what doesn't it do? Firstly, it ensures that the government gets all its tax revenue, about $100 million, and probably a little bit more. It implements more red tape and an administrative burden on businesses that use toluene and other petroleum derivative chemicals in industry. These businesses have to pay the full excise and claim it back. It came too late, and it does nothing to ensure consumers are protected from inferior fuel supplies damaging to their vehicles.

What are the implications of this legislative change that is being contemplated here? With no safeguards in place to ensure fuel quality, consumers in the industry are not provided with any protection whatsoever. The government has ensured that it receives all of its revenues, but that is about it. As I remarked earlier, the aviation fuel contamination debacle in Victoria should have been enough to warn this government about what consequences, potentially, there could be in Australia for this sort of practice to spread to other industries—in this case, aviation.

What we are debating here certainly is something restricted to fuel substitution in petrol for cars, but at the end of the day the basic tenets of the problem, and the causes, and the reasons behind why people decide to get involved in these dreadful practices, could easily be transferred elsewhere.

The government must take responsibility. The tax office must take responsibility. I know they are all overworked in the tax office; I know the government has imposed on them this burden of the implementation of the GST. We know that they are out there composing songs. We know that they are out there spending $420 million in trying to see that the Australian public receive the necessary propaganda. We know they are preparing the letter for the Prime Minister to sign and send out to every household, personally addressed, while ripping off from the Australian Electoral Commission what I had believed were private addresses and occupations so that carefully targeted letters can go to consumers around Australia.

But the main game here was the protection of consumers. The main game here was to stop the bleeding of taxation revenue, and the government let this go through to the keeper. It is high time that this legislation was in this place for debate, and it is high time that it was placed before the people so that they could judge the tardiness of this government. It is also appropriate that the amendments that have been moved by my colleague the honourable member for Wills are given a fair and robust debate in this place as well. I commend the legislation to the House, but I particularly commend those amendments that have been moved.