New Zealand has taken an aggressive approach to climate change with policies in place to help it achieve carbon neutrality by 2050. It has even taken steps to have financial firms report on the environmental effects of their investments. This set to impact 200 of the country’s largest businesses and foreign firms.
Now, a broader impact is likely to occur if the NZ government opts to put an end to fuel taxes and road user charges. An ongoing review by the Ministry of Transport is evaluating the suitability and future of this revenue.
Since 1927, the government has instituted fuel taxes as a means of funding for the transport sector. More specifically, the construction and maintenance of roads, alongside other transport projects. Currently, the government collects about $4 billion each year through these levies. If they choose to end these charges, the government will have to consider what other ways they can fund roads.
The concern here is how appropriate it is for the government to continue charging fuel taxes at a time when they are trying to get people to be more environmentally conscious and switch to better alternatives like public transport and electric vehicles.
Electric vehicles are not currently charged for road usage, nor fuel tax. If fuel taxes were to end, the revenue shortfall may have to be covered by instituting road user charges on electric vehicles. Care would however need to be taken to ensure hybrids do not end up double-taxed from both road usage and petrol excise duty.
Under the new proposals, road users would be tracked via GPS. This would determine the level of usage drivers make of roads and have a levy charged in proportion. According to the tax ministry, this would see people that use the roads become responsible for its maintenance.
However, the pandemic has shown that reliance on this kind of funding can be risky. With fewer people travelling due to Covid restrictions, a different system may need to be considered. Transport Minister, Michael Wood, has said the government would have to balance issues like reducing emissions against a need to raise sufficient revenue. He indicated an interest in reviewing the outcome of an inquiry into congestion charging in Auckland that he hoped would provide useful insights that could be applied.
These changes are however unlikely to be formally considered any time soon. Though the government has indicated a desire to institute an overhaul of the transport revenue system, fuel tax revenues are expected to continue being a reliable revenue stream for at least the next decade.