In 2012, Transport Minister Gerry Brownlee announced increases to petrol excise duty and road user charges.

Some questions and answers about the increases are set out below. 

When did the increases take effect?

The increases took effect on 1 August 2012.

How much did petrol excise duty and road user charges (RUC) increase?

Petrol excise duty increased by 2 cents per litre, or 4.1 percent. The rate of petrol excise duty increased from 48.524 cents per litre to 50.524 cents per litre.

These petrol excise duty rates are GST exclusive.

RUC increased by 4.1 percent on average, though the exact increases varied for different vehicle types. Links to the new rates of RUC that will apply from 1 August can be found here.

These RUC rates are GST inclusive.

How much will these rates increases add to annual vehicle operating costs for:

Small vehicle owners?

Currently the user of a petrol vehicle pays, on average, $3,300 per year for the vehicle’s licence and petrol costs (including all taxes)1. A 2 cent per litre increase in petrol excise duty increases the average cost by around $30 a year, or 0.9 percent. The financial impact is similar for a light diesel vehicle subject to RUC.

Heavy vehicle operators?

The cost of RUC represents about one tenth of the total cost of a road freight operator (including wages, insurance and depreciation as well as fuel and other direct truck operating costs). An increase in RUC of, on average, 4.1 percent is therefore estimated to increase the total cost of truck operation by around 0.4 percent.

The impact may be higher for some operators where RUC makes up a greater portion of their total operating costs.

How much extra revenue did the increases generate in the 2012/13 year?

The increase was expected to generate about $90 million in 2012/13 and approximately $100 million each year thereafter.

Why was an increase needed?

In order to ensure there is sufficient revenue available to meet 2012/13 transport expenditure targets set out in the Government Policy Statement.

An increase in petrol excise duty and RUC of 1.5 cents per litre was originally scheduled to take effect on 1 July 2011. However, the government deferred the increase due to the challenging economic circumstances New Zealand was experiencing as it continued to recover from the global economic recession and the Canterbury earthquakes.

The 1 August 2012 increase was in effect a catch-up increase to ensure there continued to be sufficient revenue available to meet the government’s land transport expenditure needs.

Why was there not a flat increase in RUC rates like there was for petrol excise duty?

RUC are informed by a cost allocation model administered by the Ministry of Transport. The model is designed to allocate the costs between vehicles of different types and weights, according to the costs they generate for the road network.

While the cost allocation model is currently used to guide the setting of RUC, many vehicles are paying less than the model suggests they should.

To ensure more parity in the future, and more consistency between the model and actual RUC, the increase will be larger for vehicles currently most undercharged according to the model. Those vehicles that are least undercharged will face smaller increases. The average increase across the RUC paying fleet will be 4.1 percent.

To read more about the cost allocation model, see the Changes to the cost allocation model questions and answers.

Some people faced RUC increases of more than 4.1 percent. Why was this?

This increase was implemented at the same time as the transition to the new RUC system enabled by the Road User Charges Act 2012. Under the Act, the definition of vehicle weight for RUC purposes changed from operator-nominated weight to the maximum allowable on-road weight.

Changes resulting from the transition to the new RUC system were revenue neutral - they did not generate more revenue for the National Land Transport Fund than previously. However changing vehicle weight definitions meant that charges for all vehicles changed and some individual vehicles now pay more and some less than they did previously.

This meant that charge increased substantially for vehicles that previously paid charges for weights well below the average carried by other vehicles of their type.

Further background questions on RUC are available here.

 


1.This assumes an average fuel efficiency of 10 litres per 100 kilometres travelled, and an average annual distance travelled of 14,000 kilometres.