Scam on petrol sparks spot tests

Byline: SUSHI DAS and JASON KOUTSOUKIS

Allegations of fuel dilution spur a crackdown in Victoria.

The Victorian Government is conducting tests of petrol at filling stations in an immediate crackdown on a national fuel dilution scam alleged to involve as many as 40 Melbourne service stations.

The scam, in which petrol is tainted with toluene, a paint solvent, to evade tax, worsened yesterday after Australia's biggest independent petrol retailer, Liberty Oil, alleged that such fuel was being sold regularly in 30 to 40 service stations.

In Adelaide, the Prime Minister, Mr John Howard, said he had ordered the Assistant Treasurer, Senator Rod Kemp, and the Customs Minister, Senator Amanda Vanstone, to examine ways of imposing an excise on toluene to thwart the scheme.

The action came as the chief executive of Liberty Oil, Mr Mark Kevin, said the scheme had been going on for more than a year despite repeated complaints from the company to the Federal Government that petrol was being diluted with toluene, normally present in petrol in only small amounts.

He said the company had tested samples from various outlets in Melbourne and discovered the presence of the solvent at unacceptable levels.

He said the Treasurer, Mr Peter Costello, the Australian Tax Office and Customs had been informed about the problem 18 months ago, but had failed to act. The Commonwealth had lost an estimated $500 million in the past 18 months as a result, he said.

The scam came to light after revelations by the New South Wales Government on Tuesday that six Sydney service stations were selling petrol containing up to 60 per cent toluene.

The Victorian Minister for Consumer Affairs, Ms Marsha Thomson, said the Government had been forced to order Victorian Fair Trading investigators to take petrol samples from Melbourne service stations to identify any problems because Canberra had failed to take any action.

She said investigators were focusing on metropolitan outlets selling petrol at ``suspiciously low prices'', which she defined as being below the wholesale price.

Any evidence of petrol dilution would be referred to the Commonwealth for prosecution, she said. She would not reveal the metropolitan areas in which the investigators would be operating.

The racket allegedly involves petrol tankers being taken to storage depots such as those at Coode Island where toluene is added. The petrol is then sold to service stations for less than the market price.

Petrol attracts an excise of 44 cents a litre while toluene is tax-free.

Liberty Oil, the RACV, the NSW Fair Trading Minister, Mr John Watkins, and industry sources said they were outraged and deeply frustrated by Canberra's inaction.

In high concentrations, toluene damages fuel systems in vehicles, damages rubber seals and affects engine performance.

A spokesman for the RACV, Mr David Cumming, said the motoring club had known about the problem for more than a year, but had not issued a warning to its members because it did not want to start a scare campaign. He criticised the Federal Government for its inaction, saying now that the petrol problem had been exposed the Commonwealth was

focusing on revenue loss rather than the plight of consumers.

The Federal Government earns about $12 billion in petrol revenue a year, he said.

Liberty Oil, the RACV and the Australian Institute of Petroleum have called on Canberra to tax all petroleum products to remove the incentive to dilute petrol.

The RACV has also called for a regulated Australian standard for petrol to replace the existing voluntary code and regular inspections of petrol stations.

The Federal Opposition's shadow assistant treasurer, Mr Kelvin Thomson, called for an immediate federal investigation into fuel substitution.

He alleged staff in Customs, who investigated fuel dilution, were transferred to the Australian Taxation Office in November 1998 to help with GST-related work, leaving the department insufficiently staffed to conduct checks on service stations.

In Adelaide, Mr Howard said one way to thwart the scam would be to impose excise on the substitute. ``But you've got to do it in a way that it doesn't hit people that have got a legitimate use of that substitute for paint-thinning purposes,'' he said.

``I have spoken to a few people this morning and the two ministers, Senator Kemp and Senator Vanstone, are examining a way of counteracting this activity,'' Mr Howard said.

``We don't want to put an excise on people who legitimately use paint thinner as that would be unfair as well as unpopular so we are looking at the moment for a way of stopping this abuse,'' he said.

A spokesman for Senator Kemp said a decision on the specific measure needed to tackle the problem would be made early next week.

Late yesterday Mr Costello issued a statement to reassure people who legitimately use toluene.

``The Government will not be changing the excise regime to penalise people who legitimately use paint solvents or other chemicals that are not subject to excise.''

Caption: Photo: Pumped up: Liberty Australia CEO Mark Kevin alleges widespread fuel tainting. Picture: JASON SOUTH. Cartoon by Tandberg.
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Publication: The Age
Publication date: 3-3-2000
Edition: Late
Page no: 1
Section: News
Length: 849
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