Transport isn’t cheap: the government, and councils, will spend about $4 billion in the next three years to maintain and improve the transport network. These costs are funded through taxes on petrol, and Road User Charges for diesel and other vehicles, with both of these charges getting funnelled into the National Land Transport Fund. Local roads are also partly funded by council rates revenues.

If you drive a petrol car, the amount you pay towards the road network depends on how much petrol you use. If you buy a car which uses half as much petrol as your old one, you’ll only pay half as much into the National Land Transport Fund.

A consumer who buys a more efficient diesel car, though, will essentially continue to pay the same amount of tax. As I’ve written previously, that’s quite a bit less than for petrol cars, although this discrepancy is (slowly) being phased out. This means that petrol car drivers are more incentivised to choose efficient cars than diesel drivers. That isn’t a major issue, though, given that around 90% of the cars in New Zealand run on petrol.

Petrol vs diesel
Image source: Road User Charges Review Group

The current system amounts to a hidden subsidy for consumers who use efficient petrol cars, as they contribute less towards maintaining the road network (as well as paying less in ACC levies, which I hope the ACC is taking into account in the reviews they’re running at the moment). The subsidy isn’t necessarily a bad thing. It may be welfare-enhancing, i.e. make society better off, if consumers “undervalue” fuel economy. International research on how consumers value fuel economy has given very mixed results, so the jury is still out on that.

So, the current regime encourages the uptake of more efficient petrol vehicles, which could include petrol-electric hybrids. At the same time, however, the system could slow the uptake of efficient non-petrol vehicles, such as diesel cars or fully electric vehicles. Unlike many other countries, New Zealand doesn’t provide any other incentives to choose more efficient cars, so that could be one argument for retaining the current system.

A 2007 paper by Simon King at the Ministry of Transport noted that as efficient petrol cars become more common, the government’s tax take will decline, meaning that the per-litre level of excise duty will have to be raised to maintain government revenues. He argues that “this could be justified as an incentive to adopt more efficient vehicles”, while pointing out that “a more comprehensive solution is to apply Road User Charges… for all vehicles”. Of course, we’re already seeing a falling tax take, as Matt has pointed out in the past, although that’s more due to a decline in total travel than improvements in efficiency.

The Road User Charges Review Group, which published its findings in 2009, recommended that the government level the taxation playing field, either adopting the Road User Charges scheme for all vehicles or replacing the charges faced by diesel cars with an excise duty, similar to that on petrol. The group stated that “preference is given” to the first option, i.e. making the Road User Charges scheme universal.

While the differential taxation systems on petrol and diesel do not appear to be a priority for the government at this stage, it is likely that they will need to be addressed at some stage in the future – especially as more advanced vehicles become available. However, King’s 2007 paper noted that for the meantime, the petrol duty “is extremely efficient, easy to administrate and guarantees a steady flow of incoming funds”. The current system seems likely to be around for at least another few years.

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  1. I would like to see all petrol driven cars as well as the Diesel Vehicles pay equally for use of the road through fuel taxes = also the heavy trucks (with their heavy loads) do greater damage to our roads and would like to see them pay according to the weights they carry (as well as distance they carry this weight) – both a type of “User Pays”

  2. My vehicle looks like a car, but is propelled by skedaddling my feet on the road. I use it mainly for commuting between the quarry and my home, and occasionally for picking up brontosaurus ribs (which can make my vehicle unstable). If everyone lived the kind of Stone-Age lifestyle I do then fuel would not be an issue.

  3. Most economically efficient option must surely be both an RuC and a fuel excise. The former as congestion tax and the latter as an environmental levy. Would be difficult to sell to public though. Also RUC is tricky to enforce with current system. Ultimate system is a GPS based system but can’t see it happening anytime soon.

    1. Yep, as long as we continue to use the 4th power as the basis for charges we should be looking to collect at least $2 from each cyclist a year, more for those in lycra.

    2. I disagree. The revenue from cyclists would be minimal in comparison to the administration/collection costs.

      Sometimes not charging is the best policy.

      1. The best arrangement would be to build all the cycleways and cycling infrastructure that cyclists say they want, and charge that to them, whatever the amount may be. Would be a great way to finally get such infrastructure built. Road users can pay for the roads, and cyclists can pay for the cycleways. Simple and fair.

        1. Oh ok, households including cyclists don’t pay rates now? That’s where more than 50% of the money spent on roads cyclists can use come from… but hey, by all means let’s go fully user pays; you drive-a-lot suburbanites can pay for your share and the cyclists can pay for theirs. Pretty sure inner city rates are keeping your acres of tarmac in prime condition, happy to stop funding that.

          1. Of course they pay rates, just treat each user group the same – just as motorists pay for roads through rates, taxes and user charges, have cyclists do exactly the same.

            Fairness Patrick, you use it, you pay for it.

          2. Excellent idea Geoff. I can’t wait to have a rates bill where I can chose to spend my contribution on cycle infrastructure instead of traffic infrastructure… Or am I supposed to pay all my rates and taxes for car drivers and then pay extra for cycle facilities?

          3. You just wrote that cyclists already pay petrol tax, indicating you mean they are motorists. Now you’re saying they are not?

            Your rates are already spent on different transport modes, so all mode users pay for all modes, so no change needed there. The petrol tax component is the part I’m talking about. It’s generated by roads, and spent on roads. I’m just saying cycling should have its equivalent, providing funding for its own needs. That would be fair.

          4. There’s already an example being planned – cyclists will be required to pay to use the Auckland Harbour Bridge. Easy enough to implement on other dedicated cycleways, enabling them to be built in the first place.

            Unless the users are not prepared to pay, in which case the status qo of bugger all cycling infrastructure will probably remain.

          5. No Geoff, I’m saying there is no such thing as “a cyclist”, there are simply people who sometimes use bikes for transport. Those people already pay plenty of various rates and fees toward transport, but cost far less when they ride instead of line up in traffic. Why should they have to pay extra to do everyone else a favour?

          6. “I already pay, and i’m paying for your wasteful roads.”

            No, you are not paying any user charges. You pay the rates component for cycling infrastructure, just as motorists do, but you pay nothing in user charges, which motorists do. That’s why cycling infrastructure is minimal, as it has no funding stream from its users like roads do.

          7. Geoff, we can build the entire cycle network for $600m, over the last 50 years and the next 15 we will have spent 100 times that. 2% of all trips are cycle trips, 50% of transport spending is rates, cyclists are paying their share, and have not received their share of infrastructure.

        2. How do we apply the same user pays logic to footpaths? Do we fit every pedestrian with a geo-tagged pedometer? Would AT or NZTA or Min Edu have to subsidise the walking school bus just like every other school bus?

          Do we toll every driveway where it crosses a footpath, so the vehicle users pay for the damage they cause to the footpaths?

    3. I definitely think that the people who benefit from infrastructure should pay for it. Which is why footpaths, cycle lanes and so on should be paid for out of revenues from taxes on motorists, as well as rates.

      Footpaths and cycleways don’t provide a huge benefit to the people who use them. They provide a benefit to motorists, who are able to safely travel at speeds faster than walking (or cycling) pace, now that the pedestrians and cyclists are out of the way. If no cars were permitted to go faster than 20km/h, there’d be no need for “infrastructure” of any kind, and we could all safely share the street.

      That’s how it works for footpaths, although obviously we don’t actually have those cycle lanes yet. So in our current setup, motorists just travel at unsafe speeds, externalising their costs onto other road users. All the more reason they should pay to protect people on bikes (and on foot) from their cars.

      1. The benefit to motorists of getting cyclists onto cycleways is smaller than the benefit to cyclists of using cycleways. Both should contribute. In the case of rates, they already both contribute. But in the case of user charges, the funding is one-sided, falling on motorists only.

        Cyclists should be charged for their infrastructure demands. If they are not prepared to pay user charges, they cannot expect additional, dedicated infrastructure. This is indeed the case – they currently don’t provide the funding, so they currently don’t get the infrastructure.

        1. Geoff many of the roads we have simple wouldn’t have been built if we had a true user pays system. Roads enjoyed decades of investment from other sources to get then to where they are today. What you’re effectively suggesting is that we should ignore the billions we spent subsidising roads and make cyclists pay for infrastructure they use when motorists didn’t have to do the same.

          1. The investment in roads you refer to didn’t come from another specific user group, which would be the case if motorists were required to pay for additional cycling infrastructure. It also didn’t come without contribution from users, which would be the case if you expect to continue having zero contribution from cyclists in user charges.

        2. Geoff you can’t duck the pedestrian question. There is a huge amount more pedestrian infrastructure provided as part of road building than cycling infrastructure, yet pedestrians are not charged. Your “everyone should pay to make it fair” approach would suggest pedestrians should have to pay user charges. If that’s not the case, what’s the fundamental difference between pedestrian infrastructure and cycle infrastructure that makes you suggest cyclists should pay but not pedestrians?

          1. As I wrote before, we are talking about building additional infrastructure. Cyclists already get free use of the road just as pedestrians get free use of footpaths. But building new dedicated infrastructure for cyclists on top of their already available free road use is where I think they should be required to contribute, just as I would expect pedestrians to pay something if they made calls for a national footpath network. You may have noticed, state highways don’t have footpaths in 99% of cases.

        3. You completely missed my point – the benefit to motorists of getting cyclists onto cycleways is that it allows them to safely travel at higher speeds. As opposed to travelling unsafely at higher speeds, like they do now. The cyclists don’t get anything out of the cycleway other than additional safety, compared to the street – and the need for that safety is caused by the presence of cars.

          1. Steve, you’re saying all the benefits are for motorists, and therefore they should pay, yet it’s the cyclists who are demanding the infrastructure, not motorists. Payment should come from those creating the demand. As a motorist, I don’t give a toss whether there’s a cyclist on the road, other than when they misuse the road, like riding in the centre of the lane or ignoring red lights, which are things I should not have to pay for to rectify.

          2. > Payment should come from those creating the demand. As a motorist, I don’t give a toss whether there’s a cyclist on the road, other than when they misuse the road, like riding in the centre of the lane or ignoring red lights, which are things I should not have to pay for to rectify.

            Motorists (collectively) are creating the demand, by driving cars around on the streets at 50km/h, intimidating, injuring and occasionally killing pedestrians and cyclists. If motorists used the streets in a way that was safe and pleasant for other users, there wouldn’t be any demand for separate infrastructure. Of course, that would mean driving around under 20km/h, and yielding right-of-way, just like in shared spaces. Which would largely defeat the point of cars.

            So instead, motorists pay for the infrastructure to keep pedestrians safe (and should likewise pay for similar infrastructure for bikes). Even then, they’re still getting the better part of the deal, since that infrastructure still reduces amenity and lengthens trip times for pedestrians and cyclists alike, over what the streets would be like if they were car-free.

          3. Roads are intended for, and legally operated at, 50km/h. Driving on them at that speed is not dangerous. It’s a load of rubbish to say motorists create cycling demand – only cyclists create cycling demand, and if they want more cycling infrastructure, it is NOT the responsibility of motorists alone to pay for it. That’s an arrogant viewpoint to take.

          4. “Roads are intended for, and legally operated at, 50km/h.”

            Nonsense, 50km/h is the maximum speed you can travel at, you cannot travel *at* 50km/h on a constant basis as you are implying by saying that “Driving on them at that speed is not dangerous”.

            Straight from the rode code:

            You can drive at any speed under or equal to the limit, provided:

            your speed is safe for the traffic conditions (for example, slow down if you are on a busy road, or if there are pedestrians or cyclists around)


          5. > Roads are intended for, and legally operated at, 50km/h.

            Yes, because that’s a design that suits cars. And it’s incredibly dangerous to drive at the sort of speed if there’s people on bikes, or on foot sharing the street with you. 50km/h traffic becomes safe because pedestrians and cyclists are segregated into their own part of the street. The (comparatively minimal) expense of doing that is a cost of providing for cars, not a cost of providing for pedestrians and cyclists.

            Cyclists only really need a decent paved surface a few metres wide, pedestrians only really need a path with enough decent drainage to not turn to mud. The road widenings, the vast expanses of pavement, the traffic lights, the barriers for cycle lanes, all the traffic calming – these are only needed to make cars work effectively and without excessively endangering other people.

            > only cyclists create cycling demand, and if they want more cycling infrastructure, it is NOT the responsibility of motorists alone to pay for it. That’s an arrogant viewpoint to take.

            It’s the responsibility of motorists to pay to address the safety and liveability issues raised by their vehicles. The exact same way it’s your responsibility to either manage yourself, or pay for the safety issues caused by your dog, or your gun, or your crane, or your aeroplane, or your hydroelectric dam.

            We apply this logic to everything else in life, and we should and do apply it to cars as well.

          6. Conan, Steve appeared to be referring to the general 50km/h nature of roads, which is not inherently dangerous as implied.

            Steve, your comments regarding motorist responsibility might have had some credibility if it wasn’t for the fact that every cyclist on the road routinely ignores the road code. Your logic that anyone, of any mode, should pay for expensive new infrastructure because of some law breakers is inherently flawed reasoning.

            It is not unreasonable to expect cyclists to contribute to the cost of the new infrastructure that they alone are wanting. This is exactly how the Harbour Bridge cycleway will be funded – the cyclists will pay for it. It’s fair, it’s reasonable, and it gets the job done.

          7. “every cyclist on the road routinely ignores the road code”

            You calling me a criminal? That’s the most sweeping statement you have ever made, and you do specialise in them.

          8. > Steve, your comments regarding motorist responsibility might have had some credibility if it wasn’t for the fact that every cyclist on the road routinely ignores the road code.

            So does every motorist (indicating? following the speed limit? stopping at stop signs?), but I don’t see how either of those are relevant. According to the MoT, cyclists are not at fault in 64% of fatal or injury crashes between bikes and other vehicles, and have primary responsibility in only 23%. Plus, even for the fraction where cyclists are at fault, a lot of that is due to the way that the rules expect bikes to behave like cars, even in circumstances when that’s ridiculous.

            Cars do not form a danger to cyclists just because cyclists are ignoring the road code. Cars form a danger because cars at speed inherently do not mix well with bikes. Even if people really made an effort to drive well – and they don’t – it takes just one “didn’t see you, mate” or a lapse in concentration. Cars can only travel even moderately safely at speed, to repeat myself again, because we get everyone vulnerable out of the way. Car drivers crash into each other in vast numbers, but mostly it doesn’t matter thanks to the safety features engineered into the vehicles.

          9. > because we get everyone vulnerable out of the way

            To elaborate here, I’m talking about the hypothetical scenario that Geoff hates and I’m supporting – where we do actually build cycleways at the motorists’s expense. In the New Zealand of 2014, what actually happens is that we spend next to nothing on cycling, so the question of who pays doesn’t come up.

    4. “All road users should pay, that includes cyclists.” – and people who walk. Everyone should be charged as soon as they leave their property.

      1. You’re forgetting people in wheelchairs and those freeloading guide dogs, I mean why on earth should they have safe streets to travel on and not pay for it

        1. Good call Fred H, babies in pushchairs too. Charge them from day one, cheeky buggers.
          The important thing is to start tracking how much they use the footpath from the start so we can charge correctly once they start earning.
          I can see a gap in the market for a:
          “Baby’s Usage Tracking Tool” could even use it to produce “Pedestrian Lifetime Usage Graphs”

  4. RUC’s and Excise Duty are simply “Claytons” Road Tolling – Road Tolling when you’re not having Road Tolling.

    Why not call a spade a spade and implement proper NZ wide transport tolling system that everyone who uses a motorised vehicle on the roads, rather than this “tolling by another name”.

    As pedestrians, cycles and (e-bikes – by current law) are not motorised, they don’t need to pay any such taxes or tolls. But Everyone else should be paying according to the combination of road space they occupy and the damage to the road they cause.

    Now having agreed to have a NZ wide tolling system, all that then remains how to levy and collect it efficiently.

  5. Great post. I also would like to see the Toll Roads stop subsidising trucks, they only pay double the amount a car does. In Alsace, France on one section of the peage (toll way) cars were 2.80 Euros and trucks 10.50Euros. Based on the French tolls, trucks should pay around $9.50, not $4 as it is at present. Trucks do the damage, they should pay for it.

    Why do we all subsidise the trucking industry. The owners of the trucking companies have been making killer profits over the past few years.

    1. because life as we know it would fall to pieces without the freight industry. although we aren’t driving the trucks we are certainly taking advantage of the benefits they bring.

      1. Geoff, the “good stuff – trucks bring it” line is not a reason why trucks should be subsidised, or favoured over other parts of the freight industry such as rail or coastal shipping.
        Life as we know it would fall apart without lots of industries, and we take advantage of the benefits that many such industries bring. Simply by commenting on a blog, we’re involving the telecommunications, electricity, computer hardware and retail industries, at a minimum.

      1. No, but how about how goods are transported around the place? what would happen if there was no ways to mass transit things around the place for people. things would get a lot more expensive I would have thought if we could transport one thing at a time from a factory in korea or china

  6. I am of the view that ALL petrol and Diesel should have taxes charges as Excise on the Fuel – this I believe would be the easiest/simplest way of collecting this revenue – I am not sure how much the Unpaid Road User Charges have occured – I am certain that the cost of collecting Road User Charges is high and these can be subject to either unpaid fee’s or fraudulant declarations (ie meters disconnected) – I do feel that the heavier vehicles which carry heavy loads damage the roads more quickly and be subjected to extra Road User Charges according to load carried and distance the load is carried on the road

  7. Do not go for the RUC system, its clumsy and I can see things like people with little income not paying their RUC as they don’t have the spare cash and getting crucified, Then there is the illegal avoidance like speedo’s been disconnected.. Tax with the fuel purchase is the most efficient way, pre paid, done and dusted.

    Therefore why not levy diesel at the pump as per petrol? Anyone who buys bulk for non road use such as railways, Industry or farms claims back the road user charges to avoid the tax. I realise this is partially open to abuse but it probably already is anyway with farms at least.

    And outrageous as this suggestion is, public transport buses are exempt from any kind of fuel tax/RUC pending qualifying criteria as they take cars off the road and electric buses are subsidised owing to no emissions and to encourage greener PT.

    1. The problem with levying diesel at the pump is the same as the problem of raising the existing petrol levy at the pump – politicians are scared to raise it at the level required to keep paying for everything. As vehicles become more fuel efficient, people pay less in tax, and the pressure is then on to raise the levy upward more and more. They have the same issue in America, and for this reasoning there’s a growing preference there to switch to RUC’s for motorists, so that motorists take more responsibility for the high cost of their travel, instead of blaming politicians.

  8. NZ RUC is archaic. Each vehicle has a unique ID already – license plate. What is the value of a paper sticker sent through the mail to put on the screen – its hardly a barrier to fraud? The real neat thing about taxing fuel is it rewards efficient vehicles which is a benefit to NZ, its pre-paid, cheap to collect and hard to defraud. However, its not working well with plug-in hybrids though and in 3-5 years traditional cars with internal combustion engines as the only power source will be only for exotic and heavy vehicles.

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