In the discussion of transport funding recently, a lot of focus from Mayor Phil Goff has been about introducing a regional fuel tax, something the former Labour government he was apart of approved but that was repealed by the current government before it could be implemented. With Phil Goff raising the issue again, the government have said no once again.

I was asked recently just how much Auckland has missed out on from not having the tax and I thought it would also be interesting to think about how much Auckland would gain should it be implemented in the future. I thought I’d share my calculations.

The first is to look at just how much tax was proposed. This cabinet paper that recommended repealing it gives us that information.

An Auckland regional fuel tax scheme has been approved providing for a 2 cent per litre tax from 1 July 2009, a 5 cent per litre tax from 1 July 2010 and a 9.5 cent per litre tax from 1 July 2011.

The paper also notes that 10 cents was the maximum allowable under that legislation and that there was a requirement that no more than 5 cents per litre went on road projects. One other interesting aspect is that fuel tax was proposed to be on both petrol and diesel.

The end result is similar to what Phil Goff recently suggested of a 10 cent per litre tax. So similar amounts to the old scheme, but what would a 10 cent per litre fuel tax raise?

Once a quarter, Auckland Transport publish some external indicators to help give an indication as to the wider transport context. These figures include things like the number of dwellings consented, labour force numbers and fuel prices. They also include fuel sales in Auckland, which they say comes from fuel tax returns to the Auckland Council. These figures are annual rolling results.

We don’t have the exact numbers behind the data but we can make some rough guesses which would be close enough for this exercise. This suggests that as of mid-2016, petrol sales are around 1,100 million litres while diesel is about 600 million litres. Of course, a significant chunk of diesel is used for non-transport purposes and businesses would be able to claim that back. Figures included in the NZ Vehicle Fleet data suggests that around 29% of diesel is for non-transport use. Adjusting the diesel number to account for that gives us about 420 million litres of diesel that would be subject to the tax. Combined let’s say about 1,500 litres all up.

If Phil Goff gets his way with a 10 cent per litre tax, that would bring in about $150 million per year. Interestingly the cabinet paper mentioned earlier states “Each 1 cent of Auckland regional fuel tax is expected to raise about $120 million so the $150m million figure isn’t too far off.

Note – in case you’re wondering why the petrol numbers don’t show a lot of variation, that is reflects the same trends in the total number of kilometres travelled by light vehicles in Auckland as well as likely improvements in efficiency of the vehicle fleet over that time. I’m not sure of the reason for the bump in diesel sales though.

We can also use the graph above to estimate the potential revenue we would have had if the tax hadn’t been repealed by the government. Adjusting the first two years being at a lower tax rate it suggests Auckland has missed out on around $780 million in funding.since 2009.

While a 10 cent per litre fuel tax raising $150 million a year is a lot of money, it’s worth pointing out that even that is nowhere near enough. With ATAP suggests that in the first decade alone we need and additional $4 billion the question, particularly for the government, would still be just how they fund the remaining shortfall.

To fully fund the shortfall from a regional fuel tax would likely require 25-30 cents per litre to be added to the te cost of fuel in Auckland.

It’s worth noting that fuel taxes have increased by 15 cents per litre under the current government

Despite these increases, overall our fuel taxes are much lower than many countries.

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33 comments

    1. Who would do that? The Republican in the White House? The Republicans controlling both houses of congress? Or the Republicans controlling most of the states?

      1. They sure as hell should do. Surely Americans wouldn’t want their roads to be subsidised by general taxes, wouldn’t that be communism?
        Free roads but no free healthcare – what a riduculous country.

      2. Mif – no, I’m not saying that they Would, but that they Could. Arguably, they Should, rather than they Will. You’re 100% right that the Republicans wherever they are are dead against raising taxes (for anything other than the military), but I think that a large part of the problem with the USA is that their guzzling is too cheap. Despite California requiring cars there to be sold with better mileage etc, most of the US car market is still stuck in the dark ages of 1950s, where V8s rule supreme.

        The biggest seller in the USA is the Ford F150 truck, an unnecessarily large pickup that sold 17 million last year – the F range has been the TOP seller in the USA for the last 39 years. About 18mpg in the city, where most of them live. That goes hand in hand with the Republicans blind (and stupid) denial of global anthropogenic climate change.

        On the other hand, near the top of the list, you have Netherlands. Top sellers there are VW Golf, Renault Clio, and VW Polo. Probably an even bigger seller: bicycles.

  1. Roads & driving = freedom though.

    Healthcare = shouldn’t have gotten sick in the first place, or should of had insurance.

    1. Initially it probably would be however they would be able to claim it back.
      Because of the volume they purchase they could probably gain some sort of exemption so that they don’t have to go through the process of claiming it back.

      1. The fuel tax is an excise duty therefore it is paid by the importer when fuel leaves a Customs bonded facility at the port of entry, which includes the Marsden Point refinery.

    2. Fuel tax applies at the retail point of sale, no?

      So train and bus depots and other large institutional users who are supplied by tanker wouldn’t pay it in the first place.

      1. Does that mean that trucking companies with their own refuelling depot will not pay this tax? If so that would be a pity as they are exactly who should be fuel taxed

          1. This would be a separate fuel tax so there is the potential for it to be added to the cost of the diesel when first purchased by the trucking companies and them still having the same RUC to cover the rest (although we all know RUC don’t really cover the damage trucks cause to the roads).

    3. Wouldn’t it depend on whether it was a tax on the fuel, in which case yes
      Or if it was associated with usage on roads like RUC, in which case no

      It probably all depends on the implementation and who it was intended to covered by the tax. Is it a geographic specific tax or geographic and usage specific tax.

  2. Goes to show how much the oil companies in NZ are creaming it! Thing is if their margin was at a more reasonable level then it wouldn’t be too hard for the government to bump up the fuel tax to be used for transport etc rather than lining the pockets of the oil companies.
    Yes the lack of tax on fuel in the USA is one of the main reasons why they are so car centric, why that tend to have large vehicles, and why there isn’t enough money to maintain their infrastructure. They could introduce it gradually $0.10 per gallon increase each year for 5 years would bring them to a similar level as Canada and people would hardly notice it. That would raise approximately $69B per annum which would sure fix a lot of bridges and potholes! It would also cause people to think about their fuel consumption more and drive less/purchase more fuel efficient vehicles etc.

  3. Maybe other regions should have fuel taxes too, to repay Auckland for the funds that have flowed out of it on a disproportionate basis until recently.

  4. I’d be interested in the geography that this potential fuel tax would apply to. North Rodney is part of Auckland Council and has no public transport so there is a strong reliance on cars to get around.

    Politically it would go down like a lead balloon if people in Wellsford had to pay an additional fuel tax to subsidise public transport that only applies to central Auckland.

    1. You are pulling our tit, right aWanderer? How do you think Aucklanders feel about the mindless buckets of extravagance and waste that are called the RONS around Wellsford. Apparently the last of these has a BCR of about 0.2. Or in simple terms, a bit like buying a beer, taking a mouthful and tipping the rest out.
      I think the people of Wellsford might understand if say 30,000 Aucklanders travelled to the airport environs by rapid transport each day it would enable them (Wellsfordites) to be able to drive; or even catch public transport somewhere north of the bridge?

  5. Great post, and that graph of all the countries is really useful, thanks. A fuel tax is a no-brainer (for me).

    I was looking at the stats on how many km people drive the other day, and noticed the biggest increase in driving happened when the import tariffs were removed and cheap second hand Japanese cars started entering NZ. I was also looking at the stats on who walks how much – the fewer cars per household, the more time spent walking. I believe reducing the number of cars in Auckland will reduce the amount of driving, and increase the amount of walking.

    Denser housing will achieve that, as people will have less space to house cars, but I think a car tax would, too. Three of my immediate neighbours have three cars per household. I do think a car tax would encourage downsizing to one or two cars for these households. A fuel tax will encourage them to think about driving less, but if a car tax means there’s not actually a car in the driveway, that would be a real game-changer.

    1. Heidi, The household travel survey data reveal that the huge increase in vkt was caused by mostly by women. The percentage increases for women had been several times greater than for men for several decades but this was the first time km travelled also increased several times more, ie equal participation in workforce resulting in equal participation in car commuting. Also that was when tomorrow school abolished traditional school zones and interest rates were falling and employment was becoming more casuallised and PT didn’t evolve to meet these new realities, so not really surprising that PT use dropped in the 1990s .

      Having said all that, a $1000 a year rego fee for light vehicles might be a better option than a petrol tax, for the reasons you gave.

      1. Cool, thanks for that, Kevyn. I was noticing all sorts of things about changes in rural and urban demographics. I hadn’t realised the gender, school and casualisation aspects.

    2. Why are you assuming that the majority of New Zealanders want to have less access to private motorised transportation? No disrespect, but I think you are quite out of touch with what people want.

      1. I think you’re quite right: I am surrounded by people who want private motorised transportation. They have it, of course, including the ability to sit in cars for long stretches of time in increasingly congested traffic, whilst contributing heavily to climate change, air pollution, pollution of the road runoff and communities severed by wider and wider roads that are bleak, dangerous and cause the urban heat island effect.

        The good thing is that there are more and more people who are standing up and saying they want a better way, and on this website you’ll hear their ideas, and their wants: safe cycling and walking, efficient public transport, communities connected by good access for all, a population with healthy active bodies.

        1. Those are interesting, well made points Heidi. However, whilst I am very much in favour of tackling global warming, this is a world wide problem and no matter how much improvements first world countries are making, this is all offset by the growth of fossil fuel demand in the 2nd and third world. Whilst the efforts made in Scandinavia are applaudable, sadly the message coming out of the USA is going to have a terrible effect on climate change action.
          As for road growth, I think it’s just something that is going to be with us. The alternative would be Jetson like flying cars and the way Kiwis drive, no thanks. An interesting fact for you. This year India are building roads at the rate of 152km every day. Year on Year new car sales is 8-11% and they already consumer 85m tonnes of diesel and 30m tonnes of petrol a year. There is about 1200 litres in a metric tonne of diesel. There are currently no bio mandates or incentives for renewable fuels in India.

          1. Nothing I can argue with there. So we don’t have much difference in opinion – just perhaps we differ on what is achievable and what our responsibilities are.

            Perhaps it is useful to think of fossil carbon as a capital asset of the world. There is a good argument for using it wisely for the creation of positive capital that creates ongoing income. Third world countries have some catching up to do here, for equality. I can’t see any good argument, though, for using fossil carbon as if it is a flow of income.

            I personally find more personal satisfaction in living a life where my choices don’t squander the world’s assets as if they are income. Nor do I see any issue with pointing out the negative social and environmental costs of a car-based transport system. People make choices for a range of reasons, and right now there is huge suppressed demand for safe cycling and efficient public transport. The problem with implementing these modes is the amount of land and resources that car transport takes up.

  6. Your thoughts and no doubt actions are admirable Heidi. Sadly we have no moral right to tell people in China, not to burn coal or people in India, not to run airconditioners, water pumps or drive cars.
    Its like the rain forests – it’s very difficult for us in the first world to complain to Brazil or SE Asia, about cutting down the lungs of the world, when we deforested all of our lands.
    I think you are going to find the oil producers are going to re-act to EV’s and climate change measures, by accelerating the sale of their crude oil. Eventually they may come to the conclusion, to sell the oil now, as ultimately the future value could decline, Lets face it, Saudi Arabia and their friends are one technology ‘black swan’ moment, away from bankruptcy. With that in mind, why not just pump what they can now – you can only sell a finite resource once.
    I believe this is what you are seeing in the US and sadly, Trump will encourage a massive upward shift in oil production. Cheap oil will mean more driving – its just the way things work.
    NZ, with a growing population in the main city and yet small populations, far apart (outside of Auckland), would benefit from increased investment in urban public transport and regional roading.

    1. Good thing China is sick of their pollution and doing massive work to get rid of coal without being forced to. There is a reason why Solid Energy is broke.

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