Australia to increase gasoline tax in high-stakes gamble that the Senate will eventually agree

CANBERRA, Australia – Australia’s government announced Tuesday that it will increase an unpopular tax on gasoline, gambling that a reluctant Senate will eventually approve the price hike.

Some analysts predict that an ever-increasing gasoline tax will prove less popular in car-loving Australia than the much-maligned carbon tax that Prime Minister Tony Abbott’s government repealed in July.

Finance Minister Mathias Cormann said the federal tax on gasoline at the pump will increase by less than a cent to 38.6 Australian cents (34 cents) a litre starting Nov. 10. The tax will then increase by an ever-widening margin every six months, in line with inflation.

“The impact on households will be modest, but the impact on our capacity to earn a stronger, more prosperous economy will be significant,” Cormann said.

If the Senate does not pass legislation to validate the tax hikes within the next year, the government would be forced to refund 120 million Australian dollars ($106 million) in additional tax raised in the current fiscal year to oil companies, while motorists would likely not be reimbursed.

The tax used to snowball with inflation, but in 2001 it was frozen at 38.143 AU cents a litre. Months before elections that year, the government bent to the public outcry over soaring fuel prices. No government has dared raise the tax rate since.

By increasing the tax now, the government expects to raise an additional AU$19 billion over a decade.

The prospect of higher fuel prices has angered many Australians a year after Abbott’s conservative government was elected on a platform of raising no taxes.

Gasoline prices are such a hot-button issue in Australia, the previous centre-left Labor Party government excluded the fossil fuel from its carbon tax, which was levied on the nation’s worst greenhouse gas polluters.

The Abbott government announced the tax increase in its May budget and planned to impose it in August, but has failed to win sufficient support for the legislation in the Senate.

Opposition lawmakers have vowed to vote against the tax in the Senate.

Abbott told President Barak Obama during a meeting in Washington in June that the fuel tax would act like Australia’s carbon tax, which was repealed a month later, in that it would discourage motorists from using gasoline.

Norman Abjorensen, an Australian National University political scientist, said the creeping fuel tax could be more politically poisonous than the toxic carbon tax, which inflated electricity bills and contributed to the downfall of the Labor government.

“It might even be more so, because you’re hitting some very powerful vested interests as well as the general public,” Abjorsen said.