New Zealand to Abolish Petrol Tax, Introduce Distance-Based Road User Charges
WELLINGTON, New Zealand – In a notable shift to road funding, the New Zealand government announced plans to eliminate petrol tax and replace it with a distance-based Road User Charges (RUC) system, effective from January 1, 2024. The change aims to address declining fuel excise revenue due to the increasing adoption of electric and hybrid vehicles.
Currently,New Zealand’s road funding relies heavily on fuel excise duty,which is paid when purchasing petrol and diesel. As more drivers switch to vehicles that don’t use fuel, the revenue stream diminishes, creating a funding gap for road maintenance and improvements. the new system will charge drivers based on the distance they travel, regardless of vehicle type.
Transport Minister Simeon Brown unveiled the policy, stating it is a “once-in-a-generation change” designed to “future proof how we fund our roads for decades to come.” The government anticipates the change will create a fairer system,ensuring all road users contribute to roading costs.
The transition will involve a phased rollout. Initially, the RUC system will apply to all light vehicles. Heavy vehicles already operate under a RUC system, administered by Waka Kotahi NZ Transport Agency. The government has not yet specified the exact RUC rate per kilometer, but has indicated it will be set to generate equivalent revenue to the current fuel tax.
However, the move has sparked concern from both advocacy groups and unions. Tax Justice Aotearoa chairman Glenn Barclay criticized the decision to outsource the collection and governance of RUCs to private firms, arguing that collecting state-mandated charges is a core government function. He expressed worries about data privacy, stating that “the details of thousands of road users will be held and managed by private organisations with no accountability back to the public.”
The Public Service Association union’s national secretary, Fleur Fitzsimons, echoed these concerns, warning that private companies will inevitably seek a profit, potentially leading to higher fees for drivers. she highlighted the potential for increased costs associated with the private administration of the RUC system.
National Party transport spokesperson Chris Bishop acknowledged that the changes won’t promptly result in lower costs for drivers. “Nothing’s going to be cheaper, we know that,” he stated.He emphasized the need for continued investment in the roading network, regardless of the funding mechanism.
While the overall impact on individual drivers remains uncertain, the government suggests that those with multiple vehicles used infrequently, or those who primarily use vehicles like boats on trailers, may benefit from the distance-based system.The government estimates approximately 60% of New Zealanders drive less then 10,000km per year.
Background: Road User Charges in New zealand
Road User Charges have been a feature of New Zealand’s transport funding system as 1978, initially applied to heavy vehicles. The charges are designed to ensure that those who use the roads contribute to their upkeep. The current fuel tax system, introduced in 1938, has become increasingly unsustainable with the rise of fuel-efficient and electric vehicles. New Zealand aims to have 100% renewable electricity by 2030, further accelerating the shift away from petrol and diesel.
By Nik Dirga of rnz.co.nz
