THE MIKIVERSE

Henry tax review tipped to include plan for drivers to pay by kilometre

• Julian Drape From: AAP April 30, 2010 3:49PM

MOTORISTS could one day pay for every kilometre - and face higher fees for driving in cities and at peak times - under a radical plan being considered as part of the Henry Tax Review.

The idea is expected to feature in Treasury secretary Ken Henry's taxation review, to be released on Sunday.

Each car on the road would be tracked by satellite under the proposal, outlined by Infrastructure Partnerships Australia (IPA) today.

IPA executive director Brendan Lyon insists a road pricing scheme isn't a pipe dream.

"We're hopeful that it will be discussed at some length in Dr Henry's report and that governments don't close the door to discussing these kind of reform options," he said.

"This isn't some weird option that no one's considered before."

Under the scheme, existing road use taxes and charges would be abolished, including registration, licensing and fuel excise.

"You replace that with a per kilometre charge, which is more equitable," Mr Lyon said.

"People are paying based on the level to which they access the road network."

The average charge under the proposed scheme would be eight cents per kilometre.

Driving in the country would cost less, while motoring in cities would be more expensive. Using a vehicle in urban areas during peak hours would be more costly again.

"This would encourage people not to drive during the morning and afternoon peaks."

The IPA's discussion paper states an eight cent per kilometre average charge would raise an additional $4 billion annually. That would then be invested in public transport and road projects.

The infrastructure body argues under current arrangements, trips in Sydney or Melbourne cost between six and eleven cents per kilometre, depending on car type.

In December, Dr Henry said traffic congestion cost the economy $9 billion each year.

"In the face of those costs, why have we stuck to the traditional fuel tax and rego model for cars for pricing access to roads, when sensible pricing seems to offer such large benefits?" he asked.

Under the current system there's no incentive for drivers to "bargain" with one another for priority access, the Treasury secretary said.

Mr Lyon said a national road pricing scheme wouldn't rely on toll points above the road.

"Instead you're looking at a system that might be based on GPS, the 3G telephone network or something else.

"We're talking about a vehicle-based system that's able to measure the distance it's travelled, the time of day that the journey is undertaken and the location of the vehicle."

Privacy concerns "would need to be resolved", he admitted.

Norway and Oregon in the United States have committed to introducing road pricing schemes within the next decade.

But Mr Lyon said it was a medium to long-term project in Australia.

Even if governments committed to introducing a national scheme, "implementation would likely take between five and 10 years due to technology challenges".