Using Tax and Regulatory Measures to Reform Choice and Usage of Motor Vehicles for Personal ...

444 Pages·2012·4.26 MB·English

by  Prafula Pearce

School of Business Law and Taxation

Using Tax and Regulatory Measures to Reform Choice and Usage of
Motor Vehicles for Personal Transportation in Australia for the
Sustainability of Oil

Prafula Pearce

This thesis is presented for the Degree of
Doctor of Philosophy
of
Curtin University

July 2012
DECLARATION

To the best of my knowledge and belief this thesis contains no material previously
published by any other person except where due acknowledgement has been made.

This thesis contains no material which has been accepted for the award of any other
degree or diploma in any university.

Signature: ………………………………………….

Date: ………………………...

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ABSTRACT
This thesis has been motivated by the need to preserve the scarce oil resources used
by motorists for their personal transportation. The inquiry for this research was
whether the government of Australia bears some responsibility for influencing
Australian motorists’ choice and usage of motor vehicles, in order to reduce oil
consumption and preserve this scarce commodity, and whether this responsibility is
being achieved within the current regulatory and tax environment.
This qualitative research has been conducted by using interpretive description and
legal methodology. A tax policy solution has been suggested after investigating the
problem by deconstructing prior knowledge in three areas: the status of oil reserves;
the characteristics of motor vehicles that impact upon the consumption of oil; and the
tax and regulatory measures that have been adopted by other countries to influence
the choice and usage of passenger motor vehicles.
A critical examination of the various policy options for Australia was conducted to
suggest a solution for this identified problem and this thesis proposes that the best
option for Australia is to conduct a comprehensive reform of the motor vehicle taxes
and charges and introduce a Luxury Energy Tax (LET) system for motor vehicles
based on the precautionary principle and the polluter-pays principle.
The diagnosis of the problem and the design of a solution has been undertaken in this
thesis using a step-by-step approach as follows:
1. Investigate the reported data on Australian and global oil resources.
2. Explore the need to focus on reducing oil use by passenger motor
vehicles in Australia.
3. Explore the growth of passenger motor vehicle use, both globally and in
Australia.
4. Explore the design and choice of passenger motor vehicles in terms of
power and weight.
5. Investigate whether future car designs can resolve the oil problem.
6. Examine the current Australian regulatory and tax framework and its
failure to promote oil efficiency in passenger motor vehicles.
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7. Examine the regulatory and fiscal policies implemented by other
countries to promote oil efficiency in passenger motor vehicles.
8. Explore specific studies on motor vehicle taxation undertaken by the
Netherlands, Norway and the State of Oregon in the USA.
9. Analyse the criteria to develop a framework for Australia to promote
energy-efficient passenger motor vehicles.
10. Design an interventional strategy for Australia, being a tax framework
for the Luxury Energy Tax (LET).
In order to design the LET criteria, it was necessary to examine the motor vehicle
characteristics that cause increased oil use and emissions and to ensure that these
characteristics are taken into consideration in the design of the LET. The
administration, operation and implementation of the LET system are explained in
detail in this thesis. The proposed LET is then evaluated in terms of various criteria
including its net revenue generation potential, the known criteria of a good tax and
the ability of the tax to change behaviour. It is proposed that the revenues from the
LET be directed towards building public transport infrastructure. The LET provides a
new policy approach directed at resolving the problem of how passenger motor
vehicles are perceived and reducing the demand for large and powerful motor
vehicles that consume and diminish the limited oil resources.
This thesis identifies the opportunities that could arise through the introduction of a
LET, including the design of a new micro-light LET motor vehicle and
modernisation of the public transport system. The message from this thesis is that a
new way of thinking is required regarding passenger vehicle transportation, and the
application of this new way of thinking might bring about benefits and opportunities.
This thesis also identifies that without a strong political will, these regulatory and
fiscal reforms would only end up as a window-dressing exercise.

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ACKNOWLEDGEMENTS
AND DEDICATION
The topic of sustainability and peak oil was introduced to me by my husband as we
were discussing a topic to present at a tax conference. We watched the number of
motor vehicles on the road and questioned our dependency on motor vehicles for
passenger transportation and whether it was necessary to drive such large and
powerful motor vehicles for personal transportation. As I researched more into the
topic, I realised that I had to do something more to make a difference and that
taxation could be the answer.
Professor Dale Pinto was present at the tax conference and encouraged me to
commence my PhD and agreed to supervise my thesis on the chosen topic. I thank
Dale for not only starting me on this journey, but also for his encouragement
throughout the journey and taking the time to read and comment on my work.
A search on people with interest on peak oil revealed Professor Peter Newman. I
attended a seminar presented by Professor Peter Newman and after listening to
Peter’s presentation on what life could be like without oil made me realise that there
was no turning back from this journey. Peter also agreed to supervise my thesis and I
thank Peter for being a source of my inspiration and guidance.
I am also grateful to the members and directors of the Applied Law and Policy
research group, for their encouragement and research support. I thank Professor
Glenton Barton, for supporting my leave applications from work, without which this
journey would have taken a lot longer.
The PhD journey can be a lonely endeavour. However I was fortunate to have my
husband Bob to walk with me through this journey, sharing his knowledge and
guiding me. I read my drafts to Bob and he would question my choices, so I could
refine them. He helped me see my path through a mire of documents. I had no
knowledge on motor vehicles and I thank Bob for having the patience to explain the
basics of motor mechanics. Without this background understanding of the workings
of a motor vehicle and the motor vehicle industry, I could not have brought the three
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areas of sustainability of oil, tax policy and passenger motor vehicles together in this
thesis.
Finally, I acknowledge my late parents who taught me the love for life and
perseverance. If not for this strong foundation rooted in love and wisdom, I could not
have recognised the need to pursue on this journey to attempt to make a difference to
the needs of my grandchildren and the future generations. I also thank my daughter
Selina and grandchildren Joshua, Lucas and Jacob for their sacrifices whilst I
undertook this arduous journey.
This thesis is dedicated to my husband, Bob Pearce, our children and grandchildren,
and humanity in general.
This thesis is also dedicated to my late father and late mother for their endless love
and wisdom that have made me who I am.

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TABLE OF CONTENTS
DECLARATION ........................................................................................................ ii
ABSTRACT ............................................................................................................... iii
ACKNOWLEDGEMENTS ....................................................................................... v
AND DEDICATION .................................................................................................. v
TABLE OF CONTENTS ......................................................................................... vii
LIST OF TABLES .................................................................................................. xiv
LIST OF FIGURES ............................................................................................... xvii
LIST OF ACRONYMS ........................................................................................ xviii
CHAPTER 1: INTRODUCTION ............................................................................. 1
1.1 Overview and Problem Definition ................................................................... 1
1.2 Research Background and Context .................................................................. 2
1.3 Research Questions and Research Objectives ................................................ 11
1.4 Research Design and Methods ....................................................................... 12
1.4.1 Research Framework .......................................................................... 12
1.4.2 Methodology....................................................................................... 14
a. Interpretive Description ............................................................... 14
b. Legal Research ............................................................................. 18
c. Methods and Techniques ............................................................. 19
d. Ethical Considerations ................................................................. 20
1.5 Coverage and Scope ....................................................................................... 21
1.6 Thesis Structure and Organisation ................................................................. 22
CHAPTER 2: SUSTAINABILITY OF OIL ...................................................... 26
2.1 Introduction .................................................................................................... 26
2.2 Global Oil Position ......................................................................................... 27
2.2.1 What is Oil? ........................................................................................ 27
2.2.2 An Assessment of Global Reserves and Evidence of a Near-Term
Peak in Oil Supply .............................................................................. 30
a. An Assessment of the Global Reserves of Oil ............................. 31
b. Peaking of Global Oil Production ................................................ 35
c. The Energy Watch Group (EWG) ............................................... 39
d. The US Joint Forces Command: The Joint Operating Environment
(JOE) Report 2010 .............................................................................. 40
e. The International Energy Agency (IEA) ...................................... 40
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f. The UK Government Department of Energy & Climate Change 41
g. The UK Industry Taskforce on Peak Oil & Energy Security ...... 42
h. Global Witness ............................................................................. 43
i. Alternative View ........................................................................... 44
2.3 Implications of Peak Oil and the Oil Crisis: An International Perspective .... 45
2.4 Australian Oil Position ................................................................................... 48
2.5 Conclusion ...................................................................................................... 55
CHAPTER 3: ANALYSIS OF PASSENGER MOTOR VEHICLES —
GROWTH, USAGE, DESIGN AND CHOICE ........................ 56
3.1 Introduction .................................................................................................... 56
3.2 Growth of Passenger motor vehicles .............................................................. 56
3.3 Usage of Passenger motor vehicles for Transportation .................................. 60
3.4 Design and Choice of Passenger motor vehicles............................................ 62
3.5 Future Motor Vehicle Designs and their Limitations ..................................... 71
3.5.1 Biofuels for motor vehicles ................................................................ 76
a. Ethanol ......................................................................................... 77
b. Biodiesel ...................................................................................... 77
c. Hydrogen ...................................................................................... 78
3.6 Conclusion ...................................................................................................... 79
CHAPTER 4: ANALYSIS OF REGULATORY AND FISCAL MEASURES
IMPLEMENTED IN VARIOUS COUNTRIES THAT
IMPACT ON PASSENGER MOTOR VEHICLES ................. 80
4.1 Introduction .................................................................................................... 80
4.2 Fuel Economy and Greenhouse Gas (GHG) Emissions Standards for
Passenger motor vehicles ............................................................................... 82
4.2.1 Fuel Economy Standards in the USA ................................................. 84
4.2.2 Japanese Top Runner Program ........................................................... 91
4.2.3 Chinese Fuel Economy Standards ...................................................... 94
4.2.4 Fuel Economy Standards in Korea ..................................................... 98
4.2.5 Voluntary Standards in Canada .......................................................... 99
4.2.6 CO Standards in the EU .................................................................. 100
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4.2.7 Lessons for Australia ........................................................................ 101
4.3 Consumer Awareness Programs ................................................................... 105
4.3.1 Lessons for Australia ........................................................................ 109
4.4 A Survey of Fiscal Measures Implemented in Various Countries ............... 111
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4.4.1 Differential charges on purchase and use of motor vehicles ............ 111
a. Lessons for Australia ................................................................. 118
4.4.2 Fuel Taxes or Fuel Excise ................................................................ 121
a. Lessons for Australia ................................................................. 125
4.4.3 Income Tax Incentives ..................................................................... 127
a. Lessons for Australia ................................................................. 129
4.5 Demand Management Programs .................................................................. 132
4.5.1 Lessons for Australia ........................................................................ 139
4.6 Compulsory Inspection and Retiring of Motor Vehicles ............................. 140
4.7 Conclusion .................................................................................................... 142
CHAPTER 5: CASE STUDIES ......................................................................... 144
5.1 Introduction .................................................................................................. 144
5.2 Norway ......................................................................................................... 145
5.2.1 The History of Motor Vehicle Taxes in Norway .............................. 146
5.2.2 The Current Motor Vehicle Taxes in Norway .................................. 147
a. Fuel Taxes .................................................................................. 149
b. Vehicle Taxes ............................................................................ 150
c. The Purchase Tax ....................................................................... 150
d. Annual Taxes ............................................................................. 152
e. Norwegian Tolls ......................................................................... 153
5.2.3 Lessons for Australia ........................................................................ 154
5.3 The Netherlands ........................................................................................... 156
5.3.1 The Situation Prior to the Intended Kilometre Charge Regime ....... 157
5.3.2 The Abandoned Kilometre Charge System ...................................... 158
a. Equity and Fairness .................................................................... 162
b. Privacy ....................................................................................... 162
c. Technology and Operation Cost ................................................ 162
d. Public Viability .......................................................................... 163
5.3.3 Lessons for Australia ........................................................................ 165
5.4 Oregon .......................................................................................................... 168
5.4.1 Identification of the Oregon Problem with Fuel Taxes .................... 169
5.4.2 The Mission Statement and Formation of the Road User Fee Task
Force ................................................................................................. 172
5.4.3 Proceedings of the Road User Fee Task Force and the Mileage Fee
Concept – March 2003 ..................................................................... 173
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5.4.4 Strategy to Move the Mileage Fee Concept to the Design Framework:
Report to the 73rd Oregon Legislative Assembly – June 2005. ........ 181
5.4.5 The Oregon Pilot Program................................................................ 187
5.4.6 ODOT’s Critical Analysis and Pathway to Implementation ............ 192
5.4.7 Lessons for Australia ........................................................................ 196
5.5 Conclusion .................................................................................................... 198
CHAPTER 6: RECOMMENDATION OF TAX FRAMEWORK FOR THE
LUXURY ENERGY TAX ......................................................... 200
6.1 Introduction .................................................................................................. 200
6.2 The Australian Problem Reiterated .............................................................. 200
6.3 Critical Examination of Some Policy Options for Australia ........................ 203
6.3.1 Maintaining the Status Quo .............................................................. 204
6.3.2 Replace the LCT in Australia with a Purchase Tax Similar to that in
Norway ............................................................................................. 206
6.3.3 Supplement Motor Vehicle Taxes in Australia with the Introduction of
a Kilometre/Mileage Tax as was Proposed in the Netherlands and
Oregon .............................................................................................. 209
6.3.4 Supplement Motor Vehicle Taxes in Australia with Mandatory Fuel
Economy/CO Standards .................................................................. 211
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6.3.5 Comprehensive Reform of Motor Vehicle Taxes and Charges in
Australia and the Introduction of a LET System .............................. 215
6.4 THE LET SYSTEM ..................................................................................... 216
6.4.1 The Principles of the LET System.................................................... 216
a. The Precautionary Principle ....................................................... 217
b. The Polluter-Pays Principle ....................................................... 219
6.4.2 The Framework for the LET System ................................................ 220
a. The Weight of the Vehicle ......................................................... 220
b. The Size of the Engine or Engine Capacity ............................... 224
c. The Engine Power ...................................................................... 226
d. CO Emissions ........................................................................... 228
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e. The Taxing Points ...................................................................... 229
f. Taxing Point: The Purchase of the Vehicle ................................ 230
g. Taxing Point: The Annual Registration Tax .............................. 231
h. Taxing Point: The Fuelling of the Vehicle ................................ 233
i. Taxing Point: The Disposal of a Vehicle .................................... 234
j. Commonwealth or State Tax ...................................................... 235
6.4.3 The Working Design of the LET System ......................................... 238
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