Fuel tax poorly thought out solution to transport costs

Opinion

By Ken Shirley

It is such a blunt and impractical tool that it is an indefensible piece of policymaking no matter which way you cut it.News that Auckland Central MP Nikki Kaye is seeking an exemption for Waiheke and Great Barrier Island residents from Auckland Council's regional fuel tax further highlights how bad the policy is.

In many ways it would be grossly unfair to motorists on Waiheke and Great Barrier if they had to pay the tax considering their cars rarely leave the islands. However, the Waiheke and Great Barrier situation is just one of many complex workarounds that must be written into the legislation if the tax is to be anywhere near fair when implemented in under three months' time.

The Road Transport Forum, which represents the New Zealand road transport industry, has consistently opposed the concept of a regional fuel tax, not because it doesn't suit trucking operators, but because fundamentally it is just bad policy.

The fuel tax is a poorly thought-out solution to the issue of how Auckland funds some of the costs of its much-needed transport infrastructure. It is such a blunt and impractical tool that it is an indefensible piece of policymaking no matter which way you cut it.

Not only will the regional fuel tax be notoriously inefficient and economically regressive, but it will take up a lot of resources to administer and by necessity be full of loopholes and exemptions that will inevitably affect its integrity and compliance.

Will motorists who fill up in Auckland but then use that fuel to travel outside Auckland be able to access an exemption to the tax? Alternatively, what about those who purchase outside Auckland but use the fuel inside Auckland?

The whole policy is an administrative minefield that I cannot see being implemented fairly or consistently.

The most likely and practical outcome is that the fuel companies will look to spread the cost of the tax around the country to even-out the impact it has on the retail fuel market. Apart from carrying out costly and time-consuming investigations there is little the Government could do to prevent this.

The reality for the trucking industry is that the regional fuel tax and corresponding increase in road-user charges cannot be absorbed by transport operators already operating on wafer-thin margins.

This means there will be no alternative but for transporters to pass the tax on, which will increase the overall cost of transporting freight around the country and ultimately hit consumers in the back pocket.

The perverse outcome of all of this is that the private motorist, who doesn't have the ability to pass on the tax, will end up being stung twice — firstly on the fuel they use and secondly on the products they buy at the supermarket.

Surely, a far smarter solution to funding the city's new transport infrastructure could come from a combination of asset realignment, such as a partial sell-down of the Ports of Auckland in the short-term and the institution of a modern variable congestion charging scheme in the medium- to long-term.

Unfortunately, the political will does not exist for these more practical solutions and despite the obvious policy problems, it seems inevitable Auckland's regional fuel tax will be in place come July 1.

- Ken Shirley, chief executive, Road Transport Forum NZ