Sid Maher, 29 September 2015

The Institute of Public Affairs has hit out at claims by environmentalists that the fossil fuel industry is subsidised in Australia, declaring it is provided the same tax and ­accounting treatment as all other industries.

An analysis by the IPA’s director of energy and innovation ­policy, Brett Hogan, said a review by the Rudd-Gillard government after the Pittsburgh G20 meeting in 2009 concluded that Australia had no measures that fell within the scope of the G20’s definition of fossil fuel subsidies.

Environmentalists have attacked the rebates given to resources companies under the fuel tax credit scheme, accelerated ­depreciation, the removal of the carbon price and concessional rates of excise on aviation fuel as fossil fuel subsidies. They argue fossil fuel subsidies make the ­industry appear more profitable that it actually is.

But Mr Hogan’s analysis says fuel tax in Australia exists primarily as a means to help fund roads by taxing the use of fuel in on-road vehicles.

Given fuel is also used for off-road purposes like heating and machinery “a tax credit for fuel use is available to Australian companies, along similar lines to the refund that businesses receive for the GST paid at each stage of their production process’’.

He says the mining industry is responsible for less than 37 per cent of the value of claims across all industries.

“Given that this is a refund for taxes paid on the cost of doing business, fuel tax credits are not a subsidy. That they apply to all businesses, and not just those involved in mining or fossil fuels, also clearly demonstrates that this can’t reasonably be described as a fossil fuel subsidy,’’ Mr Hogan says.

He makes the same argument for accelerated depreciation, saying it is a taxation benefit that allows eligible businesses to claim back the cost of certain business inputs and it does not apply solely to the mining or fossil fuels industry. This means it is not a subsidy.

On the concessional rate of excise of aviation fuel, he said this was provided across all industries.

Extracted in full from The Australian.