Miners fear impost will saddle foreign shipping

Source:  The Australian, Thursday July 14, 2011, Annabel Hepworth

The Gillard government will impose its carbon tax on foreign ships operating along Australia's coastline, a move miners fear intensifies Canberra's crackdown on cheaper overseas vessels and will saddle them with higher costs.

The Australian can reveal that an effective carbon tax will be applied to many of the cheaper foreign-flag vessels that dominate Australia's coastal trade as they will lose out on fuel tax credits.

Steve Knott, from the peak Australian Mines and Metals Association lobby group, said the extra costs were unwelcome because "our competitors can go elsewhere and are not saddled with the additional costs".

Mr Knott said because of the fall in the merchant shipping fleet, the reliance on cheaper foreign-flagged vessels "has, by dint of reality, increased" and the extra costs could jeopardise progects.

"It's just a reality, it's part of doing business - we don't have the Australian-flagged ships and the seafarers and maritime officers and engineers.  Foreign-flagged shipping is a key component of the entire resources sector," he said.

The office of Climate Change and Energy Efficiency Minister Greg Combet said where foreign ships paid dutry or excise, "an effective carbon price will be applied by adjustments to fuel tax credits".

Airlines operating domestic routes and road and shipping operators also face the effective carbon tax through the reduction in their fuel tax credits.

Under tax rules, overseas ships have to pay excise duty on their bunker fuel in certain cases, which can be offset by fuel tax credits.  This applies to foreign ships sailing between Australia's ports for the "sole purpose" of carrying domestic cargo.

Shipping Australia chief executive Llew Russell - whose members include the local arms of big foreign-owned lines such as Maersk - said ships carrying bulk cargo such as commodities fitted this category and would almost certainly be hit by the carbon tax.

"It adds to costs for Australian consumers of shifting cargo around the coast - it's increasing costs all the time," Mr Russell said.

Australian Food & Grocery Council chief Kate Carnell said as some produce was moved by ship, this could lead to higher prices.

"It will be just another cost to food and grocery manufacturers on top of all the other costs," Ms Carnell said.

A spokesman for Fedral Infrastructure Minister Anthony Albanese said the excise and fuel tax credits system "would be capable of ensuring a level playing field across all ships".

Canberra has flagged a crackdown on the system of permits allowing business to use cheap foreign vessels as part of a series of measures aimed at halting the fall of Australia's merchant fleet.

The government has received reports from three reference groups on the shipping reforms and is considering them.

The developments came as a leading business figure cautioned that Canbarra's carbon policy would punish less emissions-intensive forms of transporting cargo.  Asciano chairman and BHP Billiton director Malcolm Broomhead critised the blanket exemption for petrol from the carbon tax and the delay in imposing the tax on heavy vehicles.