The Ministry of Transport is warning the Government its planned Auckland fuel tax may end up hitting motorists in New Zealand’s regions.
It also warns of a potential black market for fuel being formed, highlighting the risk of motorists trucking fuel from outside Auckland to sell within the city.
But Transport Minister Phil Twyford has brushed off the concerns, saying the Government has given “careful consideration” to the risks outlined by the Ministry.
The Bill to implement a 10 cents per litre tax for petrol and diesel within Auckland passed its first reading on Tuesday night and is expected to become law within months.
In its Regulatory Impact Statement (RIS) on the tax, the Ministry of Transport cites a number of risks involved in the implementation of the policy.
Its main concern is around the concept of price spreading – where a fuel retailer pays the regional fuel tax but spreads the costs across the entire national market.
This occurred in the early 1990s when a fuel tax was applied in the main urban areas.
“Price spreading is a significant concern,” the impact statement says, adding that fuel companies have a strong commercial incentive to maximise the amount of fuel sold and maximise their profit.
It says fuel companies may choose to price spread to help maximise their profits, as fuel prices vary significantly in different parts of the country.
The companies could, for example, charge approximately a three-cent tax nationally across their network to cover a 10 cents per litre regional fuel tax required in for each litre of fuel sold in Auckland.
“Price spreading would increase the cost of fuel nationwide and undermine the intended purpose of the tax, which is for a region’s road users to pay for transport projects in Auckland.”
Price increases would likely be greater in rural areas because there is less competition compared with the urban centres.
But Twyford says price spreading won’t be a significant problem.
“Fuel retailers price fuel on a competitive basis across the country. The Government is confident that these competitive pressures will ensure that fuel retailers make considered decisions about how regional fuel tax is passed on to customers.”
Risk of black market for fuel
Another risk identified by the Ministry is tax fraud whereby people could purchase fuel from outside Auckland and resell it within the city.
“With a lack of natural borders between regions, except Cook Strait, there is a significant risk that fuel will be transported into a region without the supplier declaring that the fuel was supplied into that region,” the RIS says.
“As a result, the tax would not be paid and compliant fuel retailers would be undercut.”
Tax avoidance could also be an issue, with the Ministry of Transport estimating that up to $20 million of fuel could be purchased outside the Auckland region as a result of large transport operators deciding to refuel outside Auckland to avoid the tax.
Again, Twyford says these issues are not a concern for the Government.
“The legislation now being considered by Parliament requires the New Zealand Transport Agency to enforce the obligation to pay regional fuel tax.”
He says it is expected NZTA will do this through proactive assessment of the tax paid, along with reactive monitoring and enforcement for any evasion.
There are fines of up to $15,000 for individuals and $75,000 for companies that commit these offences under the legislation, he says.
The poorer hit the hardest
New Zealand Initiative economist Sam Warburton says the tax is likely to hit people on low incomes the hardest as they tend to have older, less fuel-efficient vehicles
Modelling from the think-tank suggests people that own these types of vehicles will pay up to three times the tax of someone who can afford a new, fuel-efficient car.
“A 10c a litre tax increase in Auckland will mean that households that can afford a hybrid or other new vehicle will pay about $65 more per vehicle per year. A low-income family with an old van will pay about $150 per vehicle per year,” Warburton says.
He adds that when this is combined with the already established petrol tax, people with less fuel-efficient vehicles will pay roughly $1100 per year.
Motorists with more fuel-efficient vehicles, however, will pay just $430 over the same period. This calculation is based on the average driving distance of 10,500kms a year, Warburton says.
“A petrol tax is an outdated method of raising transport revenue. The Government should be, and is, looking to move to other methods which are more efficient and fairer, such as road user charges and road congestion prices.”
43 Comments
Big compliance too, the NZTA RIS might have noted. The draft Act (here) notes that GST will be added (so that's 11.5c/l, not 10c) and that rebates can be claimed.
So every dozer, excavator, compactor, rock truck, genset, boat - all users with absolutely zero connection to Roads - which has used taxed fuel from within the affected area (it's a Very Long List of diesel users - petrol is already subject to this hence it's low usage for such machines)) will have to have its fuel usage noted, and a rebate application made. Monthly.
The legislation seriously expects that Exempted Uses (all of the above) will be included in:
a registry of users of fuel for an exempt use and the locations where any fuel supplied to them will be used exclusively for an exempt use; and
That's gonna be a Big Dataset.....and because most of this gear is fairly mobile, the churn is high as the Exempted Use/Location pair could conceivably vary by the fraction of a day.
And it will be quite impossible to trace diesel supplied e.g. from a jerrycan on the back of the inevitable white DC 4WD ute, as to whether it had attracted the tax or not. Or even a trailer tank.....or a home diesel heating tank....truck stops outside the tax area are gonna have a bonanza on their hands.
Enough loopholes to drive a (diesel, what else?) truck through......
I happily agree that it should be tolls, not fuel tax. Where will they start them though? With no other alternative route to get into Auckland form the South (SH1) will they then put it at say Manukau? However the fact that this will cost the poorer outer suburbs and rural people either way is very much a concern - except for those of us who never go into Auckland and have no desire to. Also concern that this will spread to all Councils who are blowing money they don't have - precedent set by Auckland.
half of auckland regularly travel out of the region for business, to the bach etc. and will no doubt fill up to bypass this new tax. I certainly will, as will many others in my extended family. my guess is that petrol stations will pop up just outside city limits to the detriment of existing suppliers. The benefit to the region could very well be negated. A far better solution would be for Goff to find savings within his bloated council.
maybe. my assessment is that people find a way. my argument is more around efficiencies. create barriers, and people find a way to avoid. this is not an efficient use of resource. most businesses recognise this. Key recognised this. Goff doesn't as he is not a pragmatist. he views ratepayers as a money pit. He's a career politician who will achieve nothing.
There is always way to cheat any system (e.g tradesmen take cash), so if you are expecting a policy that doesn't have any loophole keep dreaming. As long as only minority can cheat then it should be fine. I am all up to pay the extra, if it can be spend wisely on infrastructure.
The tradesman and indeed any business will simply pass the fuel cost onto their customers. No need to take cash.
This is effectively a tax on low income earners. Those who live in the outer suburbs (longer commutes) and own older private cars (higher fuel consumption and no tax deductible running costs).
Always a reason to moan and sit on our hands, never a reason to engage brain and attempt to solve problems.
Traffic congestion - a fuel tax will never work but fix the tail backs already.
Housing crisis - it won't be solved by buying a plot of land from Unitec.
Immigration - we reserve the right to hate them but don't dare turn off our supply of workers.
Plastic bag pollution - waxy cotton is worse and paper causes deforestation.
Water quality - don't speak ill of dairy farming or suggest chlorinating our perfect aquifers.
Tax reform - capital gains is a god-given right and the system is already perfect for me.
Bike helmets - my right to choose to have a brain injury and then be covered by ACC.
Oil exploration - drill baby drill because I need to drive my Levante SUV.
Climate change - we're only 4 million people so we don't have to do anything...and it's a hoax from the Chinese to leave all their coal in the ground....or by those overpaid climate scientists whose reign of tyranny over helpless oil companies needs to stop.
In NZ we have learned helplessness and a bizarre relationship with government where they are supposedly bloated, clueless & inefficient but we always go running to them to restore fairness and seek recompense at every turn.
Really not proud to be a kiwi right now.
An increased demand for paper probably results in more land been converted to forests. Possibly some problem with unsustainable forestry if its the marginal supplier but in general I think more paper use equates to more commercial Forrest.
Not that it matters, plastic bag bans wont help anyone anywhere.
1/ There should be less immigration.
2/ The council should be forced to become more efficient and to stop spending money on uneconomical projects.
If these things happened then no extra money would be required.
However, given that these things don't appear to be happening, I think that the fuel tax is better than congestion charging because for me, driving around Ak from about 10am to about 3pm isn't too bad. If traffic loading was spread out more there would be no good time of the day to get anywhere. Any slackening off in traffic at peak times would be minimal anyway because there will be thousands with cars in their garage who would prefer to drive them at rush hour if traffic wasn't so bad. Witness the traffic on wet days.
Also this argument that its unfair to those who own old bangers, well its an incentive to scrap it and buy an old suzuki swift. Whats wrong with that incentive?
My understanding is that taxes are levied in bulk, therefore jt will be interesting to see how the companies price fuel delivered outside the boundaries but potentially supplied from already levied stock.
FWIW I save significant sums in Auckland using the Gaspy app. It weaned me off those large BP stations quickly. In my area, Mobil is far more reasonable.
During a recent Oz holiday I was reading about the impact on QLD businesses around Coolangatta of recent NSW liquor tax changes. People simply cross the border to pay less, killing the businesses on the wrong side of the state border. Why would it be any different in Auckland?
There is everything imaginable wrong with this fuel tax proposal .
Quite apart from fuel companies cheating , there are the issues of who actually pays the tax .
WHO PAYS THIS TAX ?
I will, for example, never have to pay this tax
I have a Practice -owned vehicle , and a fuel card , I dont pay for fuel at all , but my schoolteacher daughter will have to pay this tax and she drives 35kms per day just to do her job.
She is least able to afford it on top of a weekly rent of $400.
Imagine the impact on a solo mum part-time waitress who has to take her kid to Kindy and drive to and from work , she is least able l to afford this tax
PRICE RIGGING
Then you will get all manner of price rigging ............ fuel companies need to sell fuel in the biggest market , Auckland , so they will price fuel competitively , and the "losses' in Auckland will be recovered elsewhere .
Given the massive fuel literage sales nationally , its impossible to police pricing policy
There is also no way in hell you can manage this in a highly competitive free market .
ECONOMIC IMPACT
You have a direct economic impact .............supply chain vehicles , conainer vehicles coming out of the Port, courier vehicles , construction vehicles all need to use Auckland's roads .
The cost will be passed on to the person at the end of the rope.
NO NEW IDEAS OTHER THAN MORE TAXES
The other thing wrong with this is that this COL Government is hell bent on taxing us into penury , and it can only go on until we have nothing left to take , and we all become dependent on the State.
UNFAIR ON PEOPLE IN RURAL AUCKLAND
Are the vegetable farmers in the Bombays happy ?
FUNGIBLE MONEY :- WHAT IS AUCKLAND COUNCIL ACTUALLY GOING TO DO WITH THE MONEY ?
Is this tax going into a dedicated fund, or like all fungible money , is it going into the general expense fund , to pay salaries of $200,000 and all manner of perks to our august body of public servants?
What should happen is for McKinseys to get into Auckland council restructure the whole set-up and bounce every one of those overpaid public servants not giving value for money .
Then we should cut all those fancy grantsto all and sundry
The entire problem has been caused by Auckland Council dispersing suburbs far into the place formerly known as the countryside.
Fitting then that the supposed solution will be to tax heavily people being forced into the countryside by Auckland Council.
Auckland - idiocy. Cause the problem, tax the victims.
Actually unaha-closp. I dont think the Auckland Council had anything to do with our open door immigration policy which has filled our cities up with immigrants.
The city councils get the blame for not having the funds to build infrastructure for this new population of people who stepped out of the airplane and get existing infrastructure for free.
Wake up NZ and shut the door.
The price of petrol is a significant component in the CPI. So raising the price of petrol would then immediately contribute to an increase in the CPI. Since the CPI is used as a (bad) measure of price inflation it could trigger other consequences. Especially if the price of oil also goes up in concert with the new tax.
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.