By Boyd Champness

A SLIGHTLY watered-down version of the Australian Governments original tax reforms will now be passed following a compromise deal between the Australian Democrats and the Federal Government last week.

The deal paves the way for Australia to introduce a goods and services tax (GST) or consumption tax like many other western countries.

While not thrilled at having its tax package tampered with, the Government acknowledges that 85-90% of its original package will now go through.

The main change is that basic food fruit, vegetables, bread, milk and meat will not attract GST unlike all other purchasable items.

Apart from GST on basic food, the other major sticking point as far as the Democrats were concerned was the Governments proposed 58% cut on road and rail diesel excise to help rural Australians and exporters. The Democrats opposed it on environmental grounds.

But under the compromise deal the rail industry and grain growers were the unlikely winners, with the Democrats completely axing the current (AUD) 36 cents a litre diesel excise for rail. In the original tax plan, railways were to have paid an excise of 18 cents a litre.

Prime Minister John Howard told The Weekly Times the decision to exempt rail was taken because it used less energy than road transport.

The majority of Australias grain harvest is transported to port by rail and it is estimated that scrapping rail excise will save grain growers A $1.60 a tonne.

But on-road users of diesel didnt fare as well. Farmers will not see the fuel excise cut from 43 cents a litre to 18 cents a litre as proposed in the original tax package.

Instead, the diesel excise for on-road will fall to 20 cents a litre for qualifying vehicles. As expected, on-farm use of diesel fuel will continue to attract no diesel fuel excise.

Farmers and road transport operators in country areas with trucks over 4.5 tonnes will see their diesel excise reduced via a rebate to 23 cents a litre.

The revised tax package, if passed by the Senate (Upper House) this month, will apply from 1 July 2000.

National Party leader Tim Fischer and his deputy John Anderson the party that forms a coalition Government with the conservative Liberal Party and relies on rural support both threatened to quit if the diesel cuts werent implemented.

However, quitting was the furthest thing from Mr Andersons mind after the landmark deal.

Speaking to the Stock and Land, he hailed the compromise a “magnificent outcome” that would inject confidence and opportunity into the bush.

“Regional Australia has been crying out for serious tax reform for more than a decade,” he said. “Today we are in a position to deliver it in spades.”