An Opinion on Fuel Taxes

Prime Minister Jacinda Ardern made headlines on Tuesday 9 October by announcing “as of today, we are paying the highest cost for fuel in the OECD.” According to the Automobile Association , when Kiwis fill up their vehicles, they are paying 69.984c in excise tax (excluding the regional fuel tax if they’re in Auckland). Motorists are also charged GST on top of the excise. This means that if the price was $2.45 a litre, 32c of that is GST (with 10c of that cost being GST on the excise tax). Therefore, Kiwis are paying “tax on tax".

Fuel taxes have been a highly politicised issue. However, as Ken Shirley, chairman of the RTF pointed out on The AM Show back in June, both sides of the aisle have raised fuel taxes. In fact, during their nine-year tenure under John Key and Bill English, the previous National Government raised the fuel tax six times. Even with excellent driver behaviour and fuel management, there is no doubt that costs have risen steeply for fleet operators.

Where are our fuel tax dollars going?

There are compelling arguments for why Auckland’s regional fuel tax of 11.5c per litre has some benefits. Auckland’s transportation infrastructure needs some serious TLC, many people think that it’s unfair for communities such as Greymouth, Porirua and Motueka to be paying these taxes when they will not see any benefit from them. However, there are murmurs that other regions could soon be subject to fuel tax.

There are 14 roading projects that will be partially funded through the Auckland Fuel Tax. The most expensive project is the AMETI Eastern Busway, of the project’s $743 million budget, $193 million will be paid for by the Auckland regional fuel tax. The Busway will connect Botany Town Centre, Pakuranga and Panmure by a dedicated and congestion-free lane for buses. Any person who grew up in this area will tell you that this is a necessary development to connect East Auckland to the rest of the city.

I wanted to investigate how fuel taxes are dealt up in Australia and Canada, our most similar allies, as well as where the tax dollars go. Are they also paying “tax on tax” in the Lucky Country and land of the moose and goose? I thought these countries would be most comparable as they are both a part of the British Commonwealth.

Fuel taxes in Australia:

According to the Australian Taxation Office , Australians pay a 41 cent fuel excise tax per litre on gasoline. This hasn’t been without controversy either. In 2012, Australia media organisation News.com.au reported that only around 9 cents per litre of the fuel excise tax goes towards the upkeep of their roads. The rest reportedly goes into helping the Australian Government reach surplus. According to The Law Library of Congress , the Australian Government also charge GST (10 per cent), luxury car tax, heavy vehicle charges, tolls, and vehicle registration duty.

Roading projects that are being funded by Australian fuel and vehicle taxes include, the Heavy Vehicle Safety and Productivity Programme. This programme funds road enhancements, creating and upgrading heavy vehicle rest areas and the upkeep of parking and decoupling bays. Stretches of roads with a bad record for accidents are also funded via the ‘Black Spot’ programme.

Fuel taxes in Canada:

The Canadian Fuels Association breaks down the four components of fuel prices. Crude oil makes up 39 per cent, refining the oil is attributed to 19 per cent, while 8 per cent covers distribution and marketing, 34 per cent of fuel prices in Canada are taxes. Fuel taxes average around 40 cents at the petrol station, these taxes include federal taxes, provincial taxes and municipalities such as Montreal, Vancouver, and Victoria. This is without a sales tax of 5 per cent (GST) added. Yes Canadians also pay tax on tax. According to website expatisan.com, in Christchurch, fuel prices are 23 per cent higher than in Vancouver, British Colombia.

The taxes that Canadians pay at the pump go into the Gas Tax Fund (GTF). The GTF provides funding for local communities to improve their infrastructure such as motorways, public transport, disaster mitigation as well as local roads and bridges.

It is clear to see that Kiwis are paying significantly more than Canadians and Australians in taxes at the pump. The cost of fuel needs to go down in New Zealand otherwise our citizens and our businesses will feel the pinch. Fuel taxes do however, have benefits when they are funding life changing or even lifesaving infrastructure projects.