The FTC scheme also reflects a core principle of good tax policy design – that business inputs should not be taxed, the MCA said in statement.

“Fuel excise was introduced to contribute to the cost of building public roads,” it said.

“It should not apply to diesel used ‘off-road’ or to generate electricity in remote areas off the electricity grid. Like the GST system, fuel tax credits reimburse taxpayers for tax already paid on a key business input.”

Hundreds of thousands of producers across a wide range of industries rely on this scheme to keep producing and to stay competitive, according to the MCA.

“Hacking into fuel tax credits would simply constitute a new tax on regional Australia, with knock-on effects to communities in every state and territory.

“It would undermine Australia's export competitiveness at a time when we need to expand the economy and support jobs, especially in regional Australia where unemployment has risen in recent years.

“The Treasury has consistently refuted the claim that fuel tax credits represent a ‘subsidy’

“Treasury has stated that: ‘Fuel tax credits are not a subsidy for fuel use, but a mechanism to reduce or remove the incidence of excise or duty levied on the fuel used by business off road or in heavy on-road vehicles’.”