Fuel rebate: Debate with Richard Denniss

The Conversation hosts a debate between Richard Denniss and myself on the fuel rebate.

We each had about 600 words to make an argument for and against abolishing the rebate. It was quite a challenge and I think Richard and I have summarized each side of the debate pretty well.

Richard Denniss:

The fuel tax credit scheme is a subsidy that will shortly pass A$6 billion per year. Fuel excise has nothing to do with road construction and there are very good economic reasons for taxing diesel use. It’s time that this privileged group of businesses be taxed the same as everyone else.

Sinclair Davidson:

But is the rebate really an industry subsidy? Not according to the people who know best: the government, the Treasury, or the Productivity Commission. Even Chris Riedy in a 2007 Greenpeace Australia Pacific Report agrees the rebate is not a subsidy.

It is true that there is nothing to force our politicians to actually spend the money on roads. This is just another in a long, long line of broken promises. The fact is that section 81 of the Constitution requires all revenue to be paid into one Consolidated Revenue Fund – as such, hypothecated taxes constitute political fiction and fiscal illusion.

Please click through and read the whole thing.

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43 Responses to Fuel rebate: Debate with Richard Denniss

  1. Andrew

    So basically these criminals have now switched from arguing “it’s a subsidy” to “fuel consumption is bad and we should slap on a great big new tax (in addition to the MRRT and WBCT we slapped on within the Gillard omnishambles).

    [Speaking of slapping things, was this conducted online or did you have the opportunity to actually slap this imbecile?]

    That’s at least slightly more intellectually honest than what we have had before, but are they seriously suggesting that FARMING (forget the ebil mining industry for a minute) is an industry with net negative externalities in this country such that it should be taxed to minimise its consumption of inputs like diesel??? You know, like food and all that. In fact, that we should design a tax structure to reduce the amount of food grown in the world???

  2. .

    I agree Andrew. Farming which doesn’t receive welfare probably also faces a negative effective rate of protection, as mining normally does. The externalities are contained in farming due to private property and modern sustainable farming captures more carbon than any stupid programme like Direct Action ever will. Furthermore, it has the highest inter-industry multiplier in the nation.

    To apply a diesel tax on a tractor that never uses a public road is simply grubby, licentious and greedy.

    We know that any trucks owned by the farmer or otherwise used in the conveyance of good overpay road user charges and this surplus is simply put into general revenue, whilst rural roads are poorly funded.

  3. stackja

    Why not stop all subsidies and reduce tax? But who would vote for it?

  4. crocodile

    Fuel is mostly carbon. Welcome to Tony’s version of the carbon tax.

  5. Peter

    As agriculture is local purchaser but an overseas seller, there is a damned good reason to look at the net effect of taxes on that industry.
    Every industry from which we obtain supply – machinery, transport, mining, chemical – has a tax component on their cost of doing business. Not just on their profits. That cost of doing business is passed on to their customers, as it must be in order for the supplier to stay in business. However those who sell into an international market -as agriculture does for so much if its produce – has no ability to pass on that tax-cost, because we compete directly with foreign producers who do not have the burden.

    Don’t talk to us about “subsidies” when we are nett tax payers. Don’t talk to us about preparing for drought, while supporting a tax system that lays a disproportionate impost upon or cost of production, even in those years when we make no profit at all.

  6. H B Bear

    Jeez Snic, first the poet-economist Ben Eltham and now “independent” think tanker Richard Denniss. Someone will have filled their moron quota pretty early this month.

  7. Notafan

    It’s not a subsidy, but if the premise for the exemption is not valid ie diesel fuel excise is just a tax and the funds raised are not for road maintainence wouldn’t it be fairer to treat it like other excises and charge everybody the same?
    Rather than raising additional amounts of revenue the amount of the levy should be reduced.
    Australia used to exempt mining from income taxes (gold was exempt from 1924 til 1982 and other mining has a 20% exemption during the war with the exemption being removed in 1952 so that dividends appeared to be tax free ), I’m not convinced if the levy was never directed exclusively to road maintenance that some other considerations played a part when the exemption was granted.
    Heavy users of diesel would look to alternative fuels or other ways to reduce costs if the diesel rebate was removed, (not that I believe about man made climate change).

  8. H B Bear

    These hypothecated taxes are bullshit anyway.

    A Medicare levy that doesn’t even meet half the Commonwealth heath budget, petrol excise that does the same with road funding. All it does is create a misleading impression that somehow these selected government services are fully “self-funding’.

  9. Tim

    The diesel fuel rebate is the refund of over applied taxation pure and simple. The excise is for vehicle use on roads. Clearly driving a tractor around a paddock is not on a road and therefore the excise should not apply.

    Please go back and have a look at the budget docs when it was brought in and stop calling it a subsidy

  10. john constantine

    –social justice?. the registration fees that i pay for a prime mover, a bulk tipper trailer and a flat-top trailer are over 60 cents a kilometer travelled on public roads. now i get to pay road tax for something that never uses a road? the science should have been settled on this ages ago, but the lefties keep crawling back to it like a feral dog to pub vomit.

    it makes the ‘feel right’.

  11. Foggyfig

    Did you also know that Fuel Tax CREDITS (I refuse to call it a subsidy or a rebate) is classed as income when they do their tax returns?

    I think this is a silly argument really. If they don’t claim the fuel tax credits businesses can claim all the fuel expenses in the taxes at the end of the year, not just the portion that isn’t a fuel tax credit.

  12. Washout

    Well argued Sinc – although I realised Denniss was a powder puff when I saw his Press Club debate with Mockton a while back, he is an effective sloganeer. Dissecting his slogans and exposing the consequences and motivations behind them is quite difficult to do sometimes. You have done exactly this in a lucid and succinct way, well done.

  13. JC

    Denniss believes a farming tractor which never uses the road ought to be taxed. What a dishonest asshat.

  14. Snirtus

    I can’t understand why this seems so hard to understand!
    It is easier for the government to charge us the tax then make us claim it back than it is to sell us the fuel without the tax. It is just like the GST in that regard. We should not pay tax on the inputs to our business only on the profit earned. If we tax inputs there will be less income tax paid!

  15. Never mind a rebate.
    The tax should not be paid in the first place (by off road users).
    In the current form it is not a “rebate”, it is an interest-free loan by farmers to the Commonwealth.
    It is an obscenity.

  16. Andrew

    Denniss believes a farming tractor which never uses the road ought to be taxed. What a dishonest asshat.

    This. I think even the GREENS are not grubby enough to have argued for the tax on anyone other than Rinehart6666 et al – this bloke is beneath even them.

    So why aren’t the farmers pointing out what the “fuel subsidy” sheep are actually suggesting? That farmers should have to pay tax for the right to operate farming equipment, feed us, generate export $, improve national security and create saleable assets such as operating farms as opposed to worthless unused land – just because “it’s the vibe”? Why aren’t they marching down the main street of Newcastle, using hashtags, putting videos on social meeja, running petitions on Change.org and all the other stuff that seems to get extremist minority thought bubbles enacted as policy these days? (Yes, I know they have jobs. But they’re being almost as silent as Credlin, and letting these other grubs make the narrative.)

  17. Isn’t the simple solution to eliminate the diesel excise, rather than the exemption?

  18. Toiling Mass

    even the GREENS are not grubby enough to have argued for the tax on anyone other than Rinehart6666 et al

    Perhaps not grubby enough to argue for it, but they are grubby enough to want it. They never say farmers should be exempt. They would rather sneak the impost in on farmers on the back of an action against miners.

    The Greens view agriculture as a transgression against nature.

  19. Helen

    The Greens view agriculture as a transgression against nature.

    dead right, unless living in cave and harvesting from bountiful nature (now how many people did our continent support in it’s natural state, a few hundred thousand? Lots of ‘voluntary euthanasia on the green horizon ) then all farming is eeevil.

  20. Rob MW

    100% of agriculture produce is grown, harvested, transported (truck & train), processed and placed on shelves using nothing but diesel fuel, long hours and the loss of a bit of skin.

    Excises artificially increase the price of diesel and the higher cost lands relentlessly on the price of all food and the movement in the price of staple foods forms part of the inflation figures.

    Along with lifting the excise on fuel, and specifically diesel fuel, the Government intends to index future (twice yearly) fuel excise increases to inflation.

    Absolutely perfect circular reasoning which is; lift the excise of fuel and index increases to inflation; retail food prices rise; inflation rises as a direct result and then the price of fuel goes up again and the cycle continues…….until…….the supply chain can’t afford to put (diesel) in their machinery or the end consumer says “enough already”.

    Gawd these politicians are fucking geniuses.

  21. manalive

    Richard Denniss’s ‘negative externalities’ argument is B. S. because even if diesel fuel does contribute to global warming there is no viable alternative.
    That argument may be applicable to taxing tobacco smoking and alcohol consumption because people are free to consume despite any associated risks and the tax probably more that offsets the associated medical costs.
    Anyway the only demonstrable effect of climate change™ on Australia so far has been beneficial viz. an increase in precipitation throughout, but particularly in the NW.
    Apparently Denniss would like to see Australia’s mining industry shut down and all road and rail transport powered by wind and solar which is bat-crazy.
    BTW Professor you have grievously upset someone called Victor Jones, who even goes so far as to compare you to Professor Ian Plimer666, simply by being associated with the IPA.

  22. Boy on a bike

    His aim is to cripple mining. His entire argument is a smokescreen designed to obscure this fact.

  23. ChrisPer

    Dear oh dear what a dishonest groupthinking circle-jerk they have at The Conversation. Pretending a tax for ‘negative externalities’ introduced about 1955 is about Carbon Pollution(tm) and ‘diesel particulates’ (nasty smells while driving to school). Have any of them heard of road maintenance? Judging by the effect of iron ore road trains I see that externality is created right where the rubber meets the road.

  24. ChrisPer

    One out of three comments deleted for incivility, pointing out that UWA would provide a prof of psych or music to pathologise rationality on climate change.

    Am I not trying hard enough, people?

  25. Aynsley Kellow

    Richard Dennis conveniently overlooks the fact that national air pollution standards are set for ambient air quality, not end-of-pipe emissions. If he is trying to argue that air quality in the Pilbara is equal to that in Sydney, he is talking through his hat. If he thinks that emissions should be taxed the same in the Pilbara as in Sydney, he doesn’t understand the notion of taxing externalities according to the damage they cause. If he thinks you should reduce emissions by taxing fuel consumed, ignoring how efficiently it is used and what emissions are actually made….

    That’s what ‘economics’ says Richard! Our approach to air quality standards in Australia are actually quite sensible. Thankfully, it was not designed by Richard Denniss. We could, of course, introduce a complicated road user charges system, with hub odometers charging according to the damage to roads caused by heavy transport…

  26. Rob MW

    “Our approach to air quality standards in Australia are actually quite sensible.”

    Not if you are like me and own the ever increasing Environmental driven diesel engines with emissions standards which, put simply, turn the sump and oil in a Common Rail (tier 4) diesel engine into nothing more than an internal rubbish dump. The down time in fixing and/or replacing these engines (including engine and fuel management electronics) is enormous and financially debilitating. For example, replacing an injector in pre Common Rail engines use to cost about $100.00 (each x 6) in 300 hp plus engines. The internal electronic injectors used in 300 hp plus Common Rail (tier 4) engines cost about $2,500.00 (each x 6) which also involves the removal of the tappet cover and the “Lifting” of the camshaft to install.

    “Sensible” is not quite the word I would use in relation to Common Rail (tier 4) diesel engines. I suppose the only good news about this issue is that the Federal Government has been persuaded that (tier 4) is to be about as far as they should go with these standards in Australia whereas in Japan, Europe and the U.S they are well past tier 4 and are well and truly paying for their stupidity.

  27. Aussieute

    There are some great images here that debunk the lefty green brigade

    Regardless for them it would never be enough

    The mineral council also sets the record straight as well

  28. mundi

    How does the NDIS have a seperate fund, does not that violate the constitution? Or is the government paying consolidated revenue into a seperate fund as an expense?

  29. john constantine

    the new standards that have lifted the diesel engines in brand new $7-800,000 grain harvesters to never seen before levels of performance, have a side effect.

    the little lucifer bastards of things catch fire and burn on hot days, fire risk at harvest has always existed, and usually blamed on old heaps of crap not properly maintained.

    todays new diesel powered grain harvesters need a chaser bin to keep the grain away, and a tow behind fire truck to keep the sparks down. built in obselescence—old diesels kept going forever, these new things have a life of years, not decades. how does ‘scrap it and buy a new one’ work into being good for the enviroment?.

  30. john constantine

    the old deep chug diesel, big block, mass torque—reliable and tough. half a million kilometers on an old landcruiser was just run in.

    the control freaks wet themselves about smokey diesels doing the inner city school run.

    when i drive my old diesels in the paddock,there is green growing stuff everywhere, just gasping for all the nitratey smoky goodness the exhaust can feed them.

    the high pressures and miniscule tolerences of the new diesels have given us diesels that run at double the pressure, inject 5 times per stroke instead of once, have a one micron tolerence for impurities.

    they can’t last, so how can they be better? common rail turbo diesel, code for false economy.

  31. JohnA

    Well, there is 5 minutes of reading time I will never get back. Please DO NOT send me to The Conversation again.

    Apart from the abuse and moderation, the nearest we got to any sense was the last comment which introduced the agricultural use of diesel. No-one talked about marine diesel, and certainly no-one talked about industrial uses of fuels and solvents (think dry-cleaning, manufacturing, paint industry, repair workshops and panel beaters for example).

    With all the free-wheeling commentary here, we still got vastly more intelligent responses sooner in this thread than over there.

    Darn near everyone called it a “diesel fuel rebate” (old name, rolls off the tongue I guess). However the lead debaters correctly began with Fuel Tax Rebate, but degenerated after that.

    Both of the protagonists seemed to forget that Fuel Tax is applicable to on-public-road usage only, so that the question is really one of broadening the tax base to *all* usage.

    In the meantime, as the legislation stands, it is technically ultra vires for the government to collect fuel tax on non-public-road usage. So it must return the rebates.

    I supply industrial oils, lubricants and solvents, some of which attract Fuel Tax, others don’t. If Fuel Tax applies, I must disclose it separately in the invoice so that a rebate may be claimed by my customer if they are eligible (usually they are, of course).

  32. JohnA

    Rob MW #1302638, posted on May 12, 2014 at 7:09 pm

    “Our approach to air quality standards in Australia are actually quite sensible.”

    Not if you are like me and own the ever increasing Environmental driven diesel engines with emissions standards which, put simply, turn the sump and oil in a Common Rail (tier 4) diesel engine into nothing more than an internal rubbish dump.

    Since when has the oil in the sump been anything else? Why does it go black with usage? Why is there a magnet on the inside of the drain plug to catch and hold metal particulates?

    However, the latest specs (CJ-4 Low SAPS) with the low-sulphur fuel spec means that drain intervals can be extended. I thus infer that the oil must be holding less rubbish than earlier formulations, because the engine is producing less rubbish in the first place. The US engines (Cat, Cummins, Detroit, Sterling, Mack) seem to run dirtier than the European or Asian builds, and need more detergent in the formulation. What do you have in your machine?

  33. Rob MW

    “Since when has the oil in the sump been anything else? Why does it go black with usage? Why is there a magnet on the inside of the drain plug to catch and hold metal particulates?”

    Simply because the tiering system of emission standards dictate that more and more exhaust emissions are after-cooled and recycled through the engine, over and over again hence a rubbish tip. As part of the tier 4 standard a self-cleaning filter has been added to the exhaust in addition to the engine itself being used as filter.

    The question really should be; how many times can after-cooled exhaust emissions be recycled (tiered) through a diesel engine before it resembles a rubbish tip ?

    The magnet does indeed catch (only) ‘Metal’ fragments and the last time I looked if there were any ‘Metal’ fragments being chucked out the exhaust system and in this instance, fine enough (little bits of metal) to be after-cooled and put back into the sump, then you had better run and hide behind the biggest rock you can find. Oh……. and by the way, before the engine goes ‘boom’ check the warranty status and that your life insurance is paid up to date.

  34. john constantine

    the common rail injector seals are points of failure, and once a seal is compromised, the oil turns to crap so fast your wallet can’t believe it.

  35. Rob MW

    “However, the latest specs (CJ-4 Low SAPS) with the low-sulphur fuel spec means that drain intervals can be extended.”

    Sulphur is a “Lubricant” for diesel engines and by removing sulphur content from diesel it (the lubricating properties) must be replaced by something else, in this case much more expensive oils with synthetic additives and refining costs. This is nothing more than extremely high cost – no benefit – window dressing to please the arm-chair environmental experts. They financially and ethically robbed Peter to morally pay Paul.

    High cost, additionally refined low sulphur diesel (D2 – diesel), which became mandatory in Australia in 2002 at the same time as ULP was phased in, was pushed by these same arm-chair environmental experts simply because they wanted to put catalytic filtration (converters) on diesel engines but the problem was that high-sulphur diesel fuel prevented the use of catalytic filtration. No other reason can be cited.

    Not many people in Australia, at that time, noticed how immediately before the introduction of D2 diesel and ULP that the price of diesel at the pump was considerably cheaper than old ‘Super’ petrol then all of a sudden and because of the much higher refining costs incorporated in D2 diesel, that diesel became much more expensive than even the higher priced ULP.

    I have often wondered exactly how a single (1) diesel engine (i.e – 535 hp tractor) working in a 10,000 acre field could have impact on the air quality in a city 500 kms away ?

  36. .

    Thanks for that explanation.

  37. Rob MW

    Hey Dot – you’re going to like this. It was supposed by the environmental fraudsters that the emission particles from high sulphur diesel helped produce the now debunked acid rain fraud in Europe. It is interesting that the E.U did not introduce D2 diesel until 2006, long after the fraud was exposed, meanwhile, the Australian latte go-getters (as usual) beat the whole world to the moral punch.

  38. .

    We’re world leaders in great moral challenges in each era, you know…

  39. JohnA

    Rob MW #1303161, posted on May 12, 2014 at 11:34 pm

    Sulphur is a “Lubricant” for diesel engines and by removing sulphur content from diesel it (the lubricating properties) must be replaced by something else, in this case much more expensive oils with synthetic additives and refining costs. This is nothing more than extremely high cost – no benefit – window dressing to please the arm-chair environmental experts. They financially and ethically robbed Peter to morally pay Paul.

    Yes, I know the new oils are meant to substitute for the extracted sulphur as an upper cylinder lubricant – and one of the brands I carry supplies the Euro and Synthetics in gold bottles.

    Do the pluses outweigh the minuses?

    As you say, a single tractor in the back paddock might not have the impact they think of, but what about a half dozen on the fringe of the city (thinking Dingley market gardens here), or umpteen truck engines on the roads, let alone all the Toorak tractors…

    It sounds like you don’t think so.

  40. john constantine

    the new grain harvesters catching fire and burning during the australian summer haven’t started a black saturday yet, but the suspicion is that the new diesel motors are directly responsible for many fires.

    –anything like roof insulation?, so good for you that a few fires are an acceptable cost of doing business?.

  41. Rob MW

    “Do the pluses outweigh the minuses?”

    No, the pluses don’t outweigh the minuses. When specifically consigned upon heavy and light industrial, mining and agriculture machinery the costs of operating, serviceability, longevity, compliance and of the basic practicality of stuffing an engine that does not need a “Spark” to produce a massive amount of low rpm “Lugging” energy that will and can continuously operate (subject to service intervals) for tens of thousands of hours and an engine that can, and is, safely operated in very confined spaces with low ventilation (underground mines, sheds and the like without killing anybody like petrol engines will do) for very limited environmental and public health reward seems to me to be plain stupid and totally unnecessary.

    “………..but what about a half dozen on the fringe of the city (thinking Dingley market gardens here), or umpteen truck engines on the roads, let alone all the Toorak tractors…”

    There’s always a “But”. It could be accepted that those fringe market gardens do actually grow crops that just love CO2, the umpteen truck engines turns on a conscience decision by society that might require their goods and services are delivered, if society decides that they don’t give a rats about their goods and services being delivered then kick the trucks off the road and as for the Toorak tractors, well, personally and if I lived in a city and for health reasons, I would much rather have diesel power cars than petrol powered cars running all over the place any day.

    However and inadvertently you do highlight the fundamental problem, in comparing urban based Toorak diesel tractors as opposed to agriculture, commercial and mining diesel engine activities, in that the “Law” and regulations require a “One Hat Fits All” circumstance, which is the inherent stupidity in all central planners. Neither invention nor necessity required this level of Government intervention and only exaggerated environmental bullshit pushed this agenda.

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