No drop in petrol tax: Cullen

By JOHN ARMSTRONG

Finance Minister Michael Cullen is offering no respite for motorists by way of a cut in petrol tax, saying rising petrol prices mean less revenue for the Government.

Petrol and diesel prices are expected to jump again this week by up to 4c for petrol and 7c for diesel.

The expected rise is being blamed on the rising cost of crude oil, increased refining costs and the declining New Zealand dollar.

Both the Automobile Association and the Motor Trade Association claim the Government is getting millions of dollars extra in GST from the petrol price rises and are urging a drop in excise tax to compensate.

But Dr Cullen said the price increases would not produce a tax windfall. The first effect of higher prices was that people reduced their petrol consumption, which led to less revenue because excise tax was collected on volume, not value.

People also cut back spending on other items to compensate for the petrol increase.

Although the Government might collect more GST on petrol, it would collect less on other items. The end result was that the revenue effect was neutral on GST and negative on excise tax.

The last price rise was just 11 days ago when petrol prices jumped 3c to $1.17 for a litre of unleaded and $1.21 a litre for premium unleaded.

Petrol is now about 38c a litre more than it was 12 months ago.

Excise tax is at present set at 34.3c a litre for petrol. Of that, 18.7c goes into the Government's general revenue pool, 13.6c is designated for roading and 2c is levied for accident compensation.

The Government expects to collect $825 million in excise tax from petrol this year.