Greening the tax system: adopting the polluter pays principle in reducing road transport emissions

Purpose: Australia provides a range of tax concessions, which effectively reduces the overall cost of the car or car use. This experience is not unique to Australia. A 2009 study on the “harmful environmental effect of company car subsidies” found an increase in the total number of cars and that most cars under the subsidies were bigger, higher-emitting vehicles. While the Australian Government recently reformed the car benefit ‘fringe benefits tax’ scheme, by removing the incentive for employees to drive unnecessary kilometres to reduce tax liability, aspects of it still remains, with the result that it fails to discourage the acquisition of high emitting vehicles. Findings: Taxation measures not aligned with environmental measures in reducing road transport emissions may have adverse environmental effects. The presentation will discuss the importance of ‘greening the taxation system’ by adopting the polluter pays principle, so that it is the polluter that is paying for choosing a high emitting vehicle, and not the community through subsidizing high vehicle costs under the taxation system. The presentation will briefly review how Australia’s taxation instruments have contributed to the country’s poor fuel efficiency record and it’s continuing impact on the country’s passenger fleet. Failure by the Government to reform such taxation instruments will continue to provide disincentives for a behavioural change to low emission vehicles. Practical and Social Implications: Reducing road transport emissions.