30 Jun 2018

Explainer: How the fuel tax will affect Aucklanders

9:49 pm on 30 June 2018

A regional fuel tax comes into effect in Auckland on Sunday and it's expected to raise $1.5 billion directly over the next 10 years.

No caption

Photo: 123rf

On Tuesday, the government's Regional Fuel Tax bill passed its third reading, with Labour, NZ First, and the Greens voting in favour and National and ACT opposed.

The legislation will allow Auckland Council to levy a 11.5 cent a litre tax on fuel sold within Auckland.

The Auckland tax is expected to raise about $1.5 billion directly over the next 10 years and help leverage $4.3b in investment to fund projects that improve local roads.

And there is more to come.

The government also plans on raising the excise tax nationwide by 3.5 cent a litre from 1 October this year, with further hikes of 3.5 cent a litre in 2019 and 2020.

The increase in the petrol excise duty will raise $5b over 10 years to invest in infrastructure.

How much will the regional fuel tax cost motorists?

In 2017, the Automobile Association (AA) calculated a 10 cent a litre regional fuel tax would cost the average Auckland motorist, driving an average car, an extra $125 per year.

Increasing the fuel excise duty would effectively double that to $250 per year, the association said.

Groups such as the Salvation Army fear low income families will be disproportionately hit, and would cut their food and heating spending to ensure they could get to and from work.

Businesses warn firms will pass on higher fuel costs to consumers, who will pay more for supermarket items, couriered goods and building products.

The government counters that Aucklanders will get better public transport and safer roads, while the improvements should also reduce congestion.

It has also argued that some of the pain for low income families will be relieved through the Families Package, which kicks in 1 July, and puts more money into their pockets.

What will the money raised be used for?

The regional fuel tax is not for big-ticket items.

The $4.3b will mainly be channelled into a range of local improvements, with the biggest item ($225 million) to be spent on safety on urban and rural roads.

A list can be found on page 71 of this document.

What has been the reaction?

An Auckland Council poll conducted by Colmar Brunton found 52 percent of Aucklanders supported the tax while 43 percent opposed it.

But a majority of submissions to Parliament opposed the bill.

The National Party opposed the fuel tax, and has promised to repeal the legislation

The fuel tax does have a limited shelf life. It comes into force on 1 July, and will be in place for 10 years.

Was there an alternative?

Auckland councillors received advice that if the fuel tax did not go through then rates on residential properties would need to rise up to 14 percent to fund transport projects.

They voted 13-7 in favour in late May, led by Auckland Mayor Phil Goff.

Get the RNZ app

for ad-free news and current affairs