Price hikes will fuel customer ire

Duty of 48.524c on each petrol litre goes to the National Land Transport Fund for roads and other transport needs. Photo / Getty Images

Skyrocketing fuel prices have so far given the Government a $3.3 million GST windfall, but officials fear the overall tax take will decline as consumer resistance sets in.

In just over three weeks since 91-octane petrol leapt past $2 a litre, GST liabilities on that and more expensive grades have risen by about $1.75 million to almost $54 million.

Prices have shot up in three instalments to $2.16c for 91-octane petrol and to $2.23c and beyond for higher grades.

Excise duty and various levies, including a 9.9c per litre accident compensation premium and 3c for the emissions trading scheme, will have pushed the Government's total take to about $175 million - representing 42 per cent of revenue from petrol sales.

Although the Government does not take any excise from diesel users - who pay road user charges separately - their GST bill has risen by about $1.6 million to almost $33 million, after price rises amounting to 21c a litre since February 16.

But the Treasury says increases in GST revenue from fuel will be countered by reduced consumer spending on other goods.

"Because most people only have a fixed amount of money to spend, they compensate by reducing spending on other things, thereby reducing the Crown's GST take on everything else," a spokesman told the Weekend Herald.

The Treasury also expects excise revenue from petrol to fall as motorists try to conserve fuel or switch to public transport.

"With less petrol being sold, the Crown collects less petrol excise, although the decrease may be small," he said.

The Automobile Association's Mark Stockdale said that sounded plausible, but his organisation remained concerned about the principle of adding GST to excise duty.

Although duty of 48.524c on each petrol litre goes to the National Land Transport Fund for roads and other transport needs, Mr Stockdale said that was not the case with GST on excise and other levies, which account for just over 10.6c of petrol prices.

"It amounts to a tax on a tax and the AA has long called for that anomaly to be removed because it's an unjust tax and motorists shouldn't have to pay twice," he said. "While now may not be a good time to call for a tax break, we would like the Government to signal that it is something which could be removed when prices reach a peak of, say, $2.50c a litre."

Mr Stockdale said that would knock about 8c off pump prices, a significant saving for hard-pressed motorists, although he acknowledged that a law change in 2008 requiring all excise to be dedicated to the transport fund had been a big step forward for them. He noted that excise was due to rise again in July, by 1.5c a litre, and the falling exchange rate remained a threat to motorists as it would increase the cost of imported fuel, traded in United States dollars.