Mr TRUSS (Leader of the Nationals) (12:50 PM) —I am speaking today on the
Excise Tariff Amendment (Aviation Fuel) Bill 2010 and the
Customs Tariff Amendment (Aviation Fuel) Bill 2010 and
I» «move» :
That all words after “That” be omitted with a view to substituting the following words: “whilst not declining to give the bill a second reading, the House:
(1) acknowledges the importance of the role of the Civil Aviation Safety Authority (CASA) in regulating for safety in aviation;
(2) notes that CASA’s funding from aviation fuel excise has increased from $53.96 million in 2002-03 to $78.37 million in 2008-09, and will continue to increase as the industry expands;
(3) calls on CASA to improve its efficiency in the way it conducts its business so that it may use its existing resources more effectively in the regulation of the aviation industry;
(4) notes that the bill proposes to increase the excise on aviation fuel from 2.854 cents per litre to 3.556 cents per litre, that is, by 25 per cent, from 1 July 2010; and
(5) condemns the Government for introducing a 25 per cent tax increase on the aviation sector without first consulting and informing the aviation industry”.
These bills increase the excise levied on aviation gasoline and aviation kerosene sold in Australia by 25 per cent. The funds raised from this increase are to be allocated to the Civil Aviation Safety Authority to enable it to recruit 97 new staff and expand its surveillance activities. It is also intended that some of the money raised by this tax increase will be directed towards allowing CASA to clear its backlog of regulatory reforms and regulation redrafting. Aviation safety is an important issue, and the people of Australia have a right to expect that regulatory authorities like CASA are focused on ensuring that Australian skies remain safe, that our industry is well run and appropriately regulated, and that there is sufficient support for the aviation sector to be able to meet its obligations under the various regulations.
Over the years it has to be said that the relationship between CASA and the industry has not always been cordial. There has been a lot of conflict and concern within the sector that CASA is sometimes heavy-handed and unhelpful and interferes in ways that the industry considers to be inappropriate. On the other hand, I think the public do expect a competent and effective organisation that will ensure that aviation safety standards are met and that they can undertake air travel with the expectation that they will arrive safely at their destination. And those who live near an airport or, for that matter, anywhere that aviation activity occurs do not want to be innocent victims of an incident where inappropriate standards may have been practised.
CASA has a very important job—and that should never be underestimated—and it needs to have appropriate and adequate resources to be able to do its job. On the other hand, it also has an obligation to be efficient and reliable and to undertake its activities in the most cost-effective way possible. Over the years, Australia has maintained an exemplary record in the field of aviation safety and it is critical that aviation in Australia remains as safe and secure as possible.
Following the terrorist attacks of September 11 2001, the coalition government took action to improve aviation security in Australia. Since that time over $1 billion has been spent to enhance aviation security. We expanded the screening of passengers and checked baggage to ensure consistent security screening treatment of all passengers and baggage carried on jet aircraft departing anywhere in Australia. Additional funding was provided to improve security in the air cargo sector. The coalition also created the air security officer program in December 2001, which placed sky marshals on selected domestic and international flights. The sky marshal program is a valuable program and it is worth fully supporting. I was disappointed when the government downgraded the sky marshal program very early in its term. It is important that we ensure funding for this program is maintained rather than playing fast and loose with the lives of the flying public to save a few dollars. The government cannot on the one hand demand additional funds for CASA and then take a casual approach towards other elements of aviation security and border protection. I am disappointed that the government, whilst it has been keen to increase the surveillance of passengers and others entering aircraft from security perspectives, has been prepared to wind back the number of people in customs and quarantine services at airports so that inspections of not just passengers but particularly cargo have been reduced substantially. Indeed, in each budget this Australian government has cut funding to customs and quarantine services. Frankly, I think that is unsatisfactory.
However, as part of the previous government’s response to aviation security challenges, we introduced the Aviation Transport Security Act 2004, which involved aviation industry participants in maintaining aviation security and required them to develop and comply with a transport security program. That legislation also strengthened the regulatory framework surrounding aviation security and provided the flexibility necessary to respond to a rapidly changing air security environment. The coalition has a good record of ensuring safety in the aviation sector for the millions of Australians who depend on it either for their livelihood or for the ability to travel safely for work or pleasure.
CASA bears much of the responsibility for ensuring that Australian skies are safe and it is appropriate that it is both adequately resourced and efficiently run. Since being founded, CASA has been funded in part by the excise on aviation fuel, which these bills propose to increase. The rate of excise has been varied from time to time when appropriate. Most recently it was cut to its current level of 2.854c per litre at the time that the location specific pricing subsidy ended in November 2005. For many years the rate of excise on aviation fuel was linked to the CPI and was often indexed twice annually for inflation. The coalition ended this practice in March 2001, along with the deindexation of petrol and diesel excise. Some would argue that this means CASA is underresourced as it is funded in part by a tax that is not indexed to inflation. But the government is not proposing to increase the excise through this bill to address increases in costs on account of inflation but rather plans to fund an expansion of CASA’s workforce and regulatory activities—and, I might add, to pay for the new board that it has introduced to control CASA’s activities. At any rate, the amount of aviation fuel sold in Australia has increased significantly in recent years. In 2003-04, 4.4 billion litres of aviation fuel were sold in Australia. By 2008-2009, this had increased to 6.3 billion litres. Not all of these sales are subject to excise. The military, for example, are not charged excise on aviation fuel, and aviation fuel used on international flights is also exempt. Still, it is clear that, as the amount of aviation fuel sold increases, the amount that CASA collects through the excise on aviation fuel and the amount it has available to spend also increases.
CASA’s annual reports indicate that in 2002-03 it received just under $54 million from aviation fuel excise. By 2008-09, this had increased to $78 million, an increase of over 45 per cent in six years. So CASA has not been starved of funds; it has received a significant increase through the growth in aviation fuel sales. The proportion of CASA’s revenue that comes from this excise has varied slightly over time but has generally been between 50 per cent and 60 per cent over the last decade. There are other revenue streams such as direct charges that also fund CASA’s activities.
There have also been increases in fees charged by CASA in recent years as a part of a move to full-cost recovery. CASA revenues from the sale of goods and services, most of which is its fees charged to the industry, have shot up from $9.8 million in 2006-07 to $19.2 million in 2008-09. This revenue stream has nearly doubled in two years. It is also worth noting that the revenue provided by the tax increase proposed in these bills is $23.1 million in the first year. Just the increase in tax will be larger than CASA’s entire cost-recovery scheme from last year. Figures from CASA’s budget estimate that CASA expects to receive nearly $80 million from aviation fuel excise in the current financial year. At the current rate of excise, this suggests that there are just under 2.8 billion litres of aviation fuel sold on which excise has been levied. The government estimates that the increase in excise proposed by these bills will mean an additional $89.9 million over four years. This would mean the government expects to charge excise on 12.8 billion litres of aviation fuel over the next four years, averaging 3.2 billion litres per year. This means that, just on increased volume, excise would be levied on an additional 400 million litres of aviation fuel every year, or an additional 1.6 billion litres of aviation fuel over four years. This would mean an increase in CASA’s budget of an average of $11.6 million per year and a total of $46.4 million over four years just by maintaining the excise at its current rate and reaping more excise from higher volumes being consumed.
So there will be a considerable increase in CASA’s revenue from excise over the years ahead, and presumably also from its fee structure, even if these bills are not carried—even if we do not give them this extra 25 per cent excise increase. These bills propose to increase the excise on aviation fuel by 0.702c per litre from its current 2.854c per litre to 3.556c per litre. That 0.702c per litre may not sound like much, but it represents an increase of nearly 25 per cent on top of the increases in volume that are expected.
A media release from the minister’s office on budget night described this as ‘a small increase in the aviation fuel excise’. Well, if the minister thinks that 25 per cent is a small increase, I think that speaks volumes about his attitude and the attitude of the whole government towards taxes. Of course, this government has form when it comes to tax increases. It was this government that increased the passenger movement charges—a revenue measure—in its first budget. The Treasurer increased the passenger movement charge from $38 to $47 and attempted to apply this tax retrospectively to tickets that had already been sold. That $9 is costing airlines, travel agents, tourism operators and the flying public and it hit the aviation industry at a time when it was already struggling with rising costs and an uncertain economic environment. Even worse, the government has committed itself to its giant new tax on mining and has declared war on an entire industry, its workers and every Australian who owns shares in mining companies or has superannuation.
And who can forget the ETS—the great big new tax on everything—that this government is still holding over the head of every Australian. The tax increase proposed by these bills is significant, and it is causing concern amongst those in the aviation industry. Many aviation industry stakeholders I have spoken to have expressed concern over the lack of consultation involved in these bills. Many first heard about the proposed tax increase when my office contacted them for comment.
This tax increase will add costs to the aviation industry at a time when it is already facing difficult economic conditions. The aviation sector, which contributes over $6 billion each year to Australia’s economy and directly supports nearly 50,000 jobs, deserves to be regarded as more than a cash cow. Charter operators servicing fly-in fly-out mining operations are already facing a drop in business on account of the government’s superprofits tax on the mining sector. As mining operations are shut down, they are being hit from both sides, with business drying up at the same time as their fuel costs increase.
But perhaps the greatest source of concern arising from these bills is the lack of transparency in how the money will be used. The aviation industry understands, as do I, that aviation safety is a serious subject and that CASA needs to be adequately resourced to perform its duties. But these bills make no specification about how the $89.9 million estimated to be raised is to be spent by CASA. The combined second reading speeches on these two bills lasted for only 2½ double-spaced pages so there was not much detail provided. Is it any wonder that the industry is concerned? The bills simply replace one excise rate with another. There is no full detailed breakdown on how the additional funding is included in the bills. There is no guarantee that the money raised by this excise increase will make Australian skies any safer. There is also the question of why CASA needs to hire an additional 97 staff. What will these 97 new employees do? How will they contribute to a safer aviation environment? These are questions that deserve answers, but answers have been in short supply from this government.
After consultations with the aviation sector let me say that there has been considerable alarm about the new costs that this bill will impose on the sector. Virgin Blue, for instance, argue that CASA should look at cost savings within its own budget to fund some of its activities and reduce the burden of inefficient and inappropriate regulation. Rex Airlines—and I know that Rex is very much dear to the heart of the member for Riverina, who has just entered the chamber—is concerned about the tax increase. It pointed out that the excise tax was meant to be a growth tax that would enable CASA’s role to grow as the industry grew. As I pointed out earlier, the revenue for CASA has grown and will grow without this 25 per cent increase. Rex believes that CASA should live within its means. Alliance, the largest charter airline in Australia, with many fly-in fly-out mining operations, are also concerned about a tax increase at a time when their revenue is also threatened by the government’s supertax on mining profits. They will face increased costs at the same time as their revenue is reduced.
The Aerial Agricultural Association of Australia oppose any increase in the tax on aviation fuel that is not linked to increases in efficiency on CASA’s part. They regard reform of CASA as a very high priority and feel that the tax increase is an example of CASA treating the industry like a cash cow. The Regional Aviation Association are not happy. Although they accept that CASA may need an increase in their budget if they are going to improve performance, they are very concerned about the impact of this extra tax on what is already a hard-pressed sector.
There is no doubt that, had the government sought to consult with industry before they announced this tax, they would have got a lot of negative feedback. They would have got a lot of advice about how CASA can do the job expected of it without having a great big new tax imposed on the sector. I am disappointed that the government has not allowed for there to be greater consultation with the industry. In fact, the legislation, brought on early in the House today—for, I appreciate, organisational reasons—is supposed to take effect from 1 July, just four or five sitting days away. So there will be little opportunity for even the Senate to undertake normal, appropriate scrutiny of this legislation. It has been brought into the House and it has to be dealt with within days, and the industry will have to start picking up the cost immediately.
There are concerns about the way this funding is going to be used. We are told that there are going to be 97 additional employees in CASA as a result of this legislation. It is my understanding that the bulk of the excise increase, estimated at approximately $59.5 million, is to be spent on recruiting these 97 new staff. On rough calculations, that is about $600,000 per employee. I do not know how much safety inspectors get paid, but, even taking travel, superannuation and other ancillary costs into account, I am not sure why the cost of employing these staff reaches that sort of level. Both the aviation sector and the parliament are entitled to an explanation.
The legislation says it will enable CASA to continue random alcohol and drug testing. Alcohol and drug testing is already occurring. The airlines conduct random alcohol and drug testing at their own expense, in their own interests. They want to protect their reputations—a priceless asset for any airline operator—but they also want to ensure the protection of their employees and their property.
No key performance indicators or benchmarks to measure the effectiveness of the additional funding have been released. The government is responsible for ensuring that the aviation sector is effectively and efficiently regulated. This means ensuring that CASA is adequately resourced but it also means ensuring that any increase in the costs borne by the aviation industry is justified. They must be able to explain to those who have to pay the costs why it is necessary.
It is for these reasons that the opposition has acted in the Senate to refer these bills to the appropriate committee for examination. The committee will obtain information on why CASA needs this extra money, how it will be spent, what safety risks are involved and how this tax increase will improve aviation regulation and safety. It will also give CASA the opportunity to justify to its critics how it is managing its existing budget. I commend the amendment to the House.