15 Mar 2022

Opposition parties give government 'fail' grade over temporary fuel tax cuts

9:11 am on 15 March 2022

Opposition parties across the political spectrum have given the government a 'fail' grade over its temporary fuel tax cuts.

Christopher Luxon

National Party leader Christopher Luxon says people need a break from the rising cost of living. Photo: RNZ / Angus Dreaver

Fuel taxes have been slashed by 25 cents a litre for the next three months as the government acts to counter soaring petrol prices.

PWC tax partner Sandy Lau told Morning Report it was a "once in a generation move".

"It is something that we haven't really seen before, the government looking to reduce excise taxes specifically. But in terms of looking to achieve what they are trying to ... it's one they have been able to do really quickly and swiftly and really have an immediate impact on the petrol prices.

"There is something quite unique about this particular time but ... with the government having done this once, next time, potentially, if there is continued focus on say petrol prices, there might be call to do this again."

National Party leader Christopher Luxon said the petrol tax tweaks would provide some relief but did not address the wider cost of living crisis.

"It's not just fuel that's gone up and petrol prices that are going up; food's up 13 percent and weekly rents are up $150 a week. People deserve a break.

"The best way we think to do that is adjusting the tax thresholds; returning the extra tax Labour's grabbing from inflation back to people so they've got cash in their pockets."

Luxon estimated this could save the average earner $870 a year, while the ACT Party has said it could deliver $187 per person through its 'carbon tax refund' policy.

ACT leader David Seymour said the refund would be taken up through the Emissions Trading Scheme and come out of what he called the government's "climate slush fund".

David Seymour

ACT leader David Seymour. Photo: RNZ / Angus Dreaver

"We could have given $750 [each year] back to an average family of four. In order to make those sorts of savings under Labour's scheme you'd have to buy 3000 litres a year."

The Green Party supported the halving of all public transport fares from 1 April but had also made clear it could not get on board with fuel excise cuts.

Co-leader James Shaw said direct payment supports - through the welfare system or via tax credits - was a better, greener way to go.

James Shaw

Green Party co-leader James Shaw says direct payment supports would have been better than fuel excise cuts. Photo: RNZ / Angus Dreaver

"If we'd been able to provide some support either through the income support system or the tax system then people would have the choice about how to spend that money.

"If you only do it through fuel taxes then it's confined to that domain."

Shaw said the Green Party was also concerned there was no guarantee petrol companies would not just absorb the fuel tax cuts into their profits.

Minister of Energy and Resources Megan Woods has asked fuel businesses to share their rolling seven-day average fuel margins to monitor industry profits.

- POOL - Photo by Mark Mitchell. Energy Minister Megan Woods during the post-Cabinet press conference, Parliament, Wellington. 14 March, 2022.  NZ Herald photograph by Mark Mitchell

Minister of Energy and Resources Megan Woods. Photo: POOL/ NZME

This disclosure was based on goodwill but Woods said she had spoken to several fuel companies and they were supportive of passing every cent on to customers.

"They all seemed very amenable to these changes. They can see on the forecourts of their petrol stations the impact this is having on Kiwis when they fill up their cars."

The government expected all fuel retailers to bring prices down, she said.

"But look, we're going to have officials working with them ... in order for us to monitor that this is flowing through to consumers.

"But we know we have to monitor this because the price of petrol could well go up again depending on what happens with the price of crude and the price internationally for the price of refined product.

"What we have to ensure is that any price rise isn't an increase in the profit margins of their fuel companies."

Woods told Morning Report the government had called it an energy crisis because the pricing of fuel was a crisis for many.

While it was a crisis of pricing, there was "absolutely no issue with the physical supply of fuel in the country", Woods said.

She denied the cut was knee-jerk reaction to a bad poll.

Road User Charge cuts welcomed

Transporting New Zealand chief executive Nick Leggett told Morning Report the Road User Charge system was so complex he would "not even dare to begin to explain" it.

"There are 85 different categories across the road user charge levy system and as you can imagine it is really complex when you try and work out how you would apply a 25 cent per (kilometre) discount ... or the government's discount in this count.

"There's no fuel excise on diesel as there is on regular fuel and Road User Charges is the way the government collects money from those diesel using vehicles ... so obviously Road User Charges are a big cost for the trucking industry."

Applying any change would be hard because the legislation said changes needed 42 days' notice, he said.

Adding to the challenge was the fact that Road User Charges were purchased in advance, he said.

"We've offered the Ministry of Transport the ability to liaise on these matters so we can get them some advice on how to best bring this reduction in, but I've been assured there will be a three-month reduction, irrespective of when that commences.

"At this time of significant pressure and rising costs, this will be welcomed by the industry."

As the conflict at Ukraine's border and the Covid-19 pandemic wear on, it is unclear if fuel prices will be worse, better or the same in three months' time.

The government will review the fuel excise cuts before they end and has promised any drawbacks will be phased and only when fuel prices stabilise.

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