Petrol Tax

Petrol tax should not be used to fund the Government’s general spending. Most people would agree on that. For several decades petrol tax was a great revenue earner for the Government. It was impossible to avoid, had low compliance costs and only four companies had to pay it.

National in the late 90s changed this. Previously almost half the petrol tax went into the consolidated fund. It then made a decision to dedicate it to the land transport fund. What this means is that petrol tax is an imperfect form of user pays.

Again I think most would agree those who use the roads should pay for them. Why should someone who works from home pay the same towards road maintenance as someone who spends four hours a day driving on them?

In a perfect world we would have GPS chips that monitor every road we drive on, how congested it is, is it peak time etc and we’d get charged directly for our road use. However that technology is a wee way off, and there are huge privacy issues around that. So we have petrol tax as an imperfect but pretty good rough system of user pays.

This then leads to two issues around petrol tax. The first is whether it is set at the right level to fund the various land transport projects, or are they making a profit from it?

I asked for a copy cashflows for the National Land Transport Fund for the the last three years.  The net revenue from petrol tax, road user charges and vehicle registration fees was $2.51b, $2.63b and $2.69b in the last three years. The expenditure or distributions were $2.93b, $3.03b and $2.67b. This means that spending was greater than income by $420m, $400m and $20m surplus last year. So over the last three years $800m deficit.

That makes it clear to me that the Government is not using petrol tax to fund non-transport projects. If transport expenditure is needed, of course motorists should pay for it. I actually have a view that the petrol tax level should not be set by Government at a set level, but automatically increase or decrease to fund all transport projects that have a positive business case.

Now the second issue is what transport projects are funded from the land transport fund. The Greenies want nothing spent on roads, and it all spent on rail. There;’s never been a road they have supported. Some think there should be no subsidy for public transport – that passenger fares should pay for public transport, not road users.

I think the current mix of both road and public transport is pretty good. The NLTP plan has $12.3b invested in land transport of which $1.7b is for public transport. Some people would have you think there is little funding of public transport.