Road funding and the fuel excise

The NRMA has recently released its annual Funding Local Roads report, which identifies a “$1.96 billion funding back log needed to bring NSW’s local roads up to a ‘satisfactory condition’.”

Considering how expensive it is to be a motorist, and the huge amounts of tax revenue raised by governments from fuel excise, stamp duty, registration and transfer fees, pay parking, road tolls, infringement notices and luxury car taxes (just to name a few), it really makes you wonder where all that money is going.

On this point, perhaps one of the best recommendations made by the NRMA in this report is that a percentage of the fuel excise be provided to fund road maintenance. Fuel excise, as it currently stands is not earmarked or hypothecated to any extent for road funding. Rather, the fuel excise paid by motorists is used to cross-subsidise other, unrelated government programs, and Commonwealth funding of roads has remained well below the revenue raised from the fuel excise. (For those who want more detail on the fuel excise, this Parliamentary Research Paper is a great resource).

I’d just like to mention at this point that fuel is subject to both an excise and GST. The excise is added to the cost first, which adds just under 40 cents per litre to the total. GST is then levied on this combined total at 10% (effectively operating as a double taxation mechanism). So, for a fuel price of $1.20/litre, about $0.51/litre goes straight to the government. I can’t think of many other examples of transactions which attract such a disproportionately large level of taxation.

If governments insist on taxing motorists of every cent they have, then maybe this revenue should be set aside specifically for road expansion and maintenance, rather than going towards other government initiatives.

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