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about introducing a regional fuel tax, something the former Labour government he was apart of approved but that was repealed by the current government before it could be implemented.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.