Economics and Financing

The Federal Government's tax reform package (A New Tax System - ANTS) involves however a range of changes in the taxation of goods and services, especially transport fuel, the nature of social security and the level of income tax paid by individuals. These developments naturally give rise to the question of what effect any changes in the taxation regime will have on transport. Austroads and others have a particular interest in the effect on the road transport sector. There are key aspects of the tax reform package, which are likely to have a direct bearing on the demand for and supply of roads. Amidst the tax reform debate over the last year or so there has also been increasing public discussion about the relative treatment by governments of the various transport modes, especially road and rail. Proponents of either mode have sought to demonstrate that their mode is relatively disadvantaged in the taxation system. A previous report analysed the effects of the Federal Government's original proposal for tax reform (Austroads 1999, Report AP-135). There were several changes in this original proposal during the passage of the tax reform legislation and this report analyses the economic and transport effects of the final ANTS legislation. The Tax Package (ANTS) is modelled using a well-developed Computable General Equilibrium (CGE) model, with added key transport-related features, such as substitution by industry between different modes of freight transport. The results from this model show what happens after a change to the economic environment, such as the Tax Package, has 'washed' fully through the economic system. Additional modelling relates to the treatment of government investment in road and bridge construction, and allows a more realistic assessment of the balance between the supply of demand (congestion) for road services and of infrastructure expenditure requirements.