“Australia’s main excise bases are fuel, tobacco and alcohol. Each of these has a risk of narrowing over time due to improvements in fuel efficiency, the long-term decline in smoking rates, and lower per person alcohol consumption,” it noted.
While the 2015 intergenerational report mentioned the long-term decline in smoking as an issue, it was the first time alcohol consumption and changes in the nation’s car fleet was referenced.
Data from the Australian Bureau of Statistics about the nation’s car fleet last week revealed there are now 23,000 electric vehicles registered, a 62.3 per cent jump over the previous year, with increases expected to continue especially as major carmakers stop production of internal combustion vehicles.
A growth in electric vehicles will eventually wipe billions of dollars worth of petrol excise from the budget bottom line.Credit:Steven Siewert
Danielle Wood, chief executive of think tank The Grattan Institute, said without reform to the tax system, more heavy lifting would be done by workers.
She said replacing fuel excise with road user charges, broadening the GST, inheritance taxes or winding back concessions such as the 50 per cent discount on the capital gains tax had to be considered.
“The alternative is to continue to let taxes on labour income grow as a share of the economy and tax collections, increasing the economic drag from the tax system and exacerbating the already rising burden on working age Australians from demographic change,” she said.
“The GST base is also under long term pressure because spending on GST exempt goods and services (housing, health, education) is growing faster than the ones subject to the GST.”
Between 2019-20 and 2024-25, the amount of excise on tobacco, alcohol and petrol is expected to grow by 5.1 per cent or $1.4 billion. Personal income tax collections are tipped to grow by 18 per cent or $40 billion, while company tax collections are forecast to grow by 18.5 per cent or $15.7 billion.
Deloitte Access Economics director Chris Richardson said the intergenerational report focused on trying to grow the economy rather than the revenue challenges that were growing for government.
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He said the tax system would groan under the weight of changes, from globalisation to smoking rates, without a proper reappraisal.
“There are some fiendishly difficult areas that are going to have to be confronted,” he said.
“The tax system can’t stand still, partly because of technological changes such as vehicles, and partly because of policy. A reckoning is coming.”
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