Council investigation into fuel tax

There was quite a bit of discussion about two weeks ago when discussion of alternative funding options was raised again by the council. They had identified a number of options to investigate further, despite Gerry Brownlee shooting them down straight away. Well it seems that the council must have been working on some of the options already (or have worked really really fast) as a report to the transport committee tomorrow looks at some of the issues with a regional fuel tax a bit closer. It is important to note that the report doesn’t actually consider the actual implementation of a fuel tax or just how much it would collect.

This report provides the results of an investigation into regional fuel tax and supports a regional fuel tax remaining a potentially effective mechanism for funding transport in Auckland.

The Ministry of Transport has identified two key concerns with a regional fuel tax as the basis for a proposed amendment to the Land Transport Management Act 2003 to remove regional fuel taxes:

1. The potential for spreading a regional fuel tax to other regions or areas; and
2. The costs to administer the tax and for purchasers (such as farmers and forestry businesses) to apply for refunds where the fuel is not used on roads.

Ascari and BERL Economics carried out an investigation into these concerns and based on their analysis made the following findings:

• The imposition of a regional fuel tax now would be much less likely to result in price spreading to other regions.
• There are ways to address spreading such as penalties and a targeted monitoring programme.
• Avoidance of a regional fuel tax by consumers is likely to be a minor issue.
• Administration of a regional fuel tax at the wholesale level would be straightforward.
• If a regional fuel tax is imposed at the retail level, the administration costs are likely to be significantly lower than previously identified.
• The costs to commercial operators seeking a refund are estimated to be between $25 and $50 per firm and could be minimised further.
• The the spatial form and vehicle travel patterns in Auckland are both well matched to the requirements of an effective regional fuel tax.

The findings are proposed to be used as part of the investigation into alternative transport funding mechanisms and in feedback to the Government regarding the proposed amendment to the Land Transport Management Act 2003.

There is quite a bit of information contained within the report and I haven’t had a chance to go though it all but it does seem that at least the key concerns raised by the MOT have been addressed. Just how much money such a tax would raise is obviously quite a different matter and I suspect we will see further investigation of this and the other options identified in the year to come. Whether the government will actually accept what is contained within these reports is a different matter.

Interestingly the report says that fuel use, both petrol and diesel, peaked in 2007 at 1.6 billion litres but that it has fallen to about 1.53 billion litres. This is similar to what we have seen happen with traffic levels. The graph that accompanies it indicates that petrol makes up somewhere between 1 and 1.1 billion litres of this so at 1b litres, a 5c per litre petrol tax would raise about $50m per year.

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