The Shift from Petrol Tax to Road User Charges
The government has officially announced that the petrol tax will be phased out and replaced with a new system of electronic road user charges (RUCs) for all vehicle owners. This marks a significant shift in how road usage is funded in Aotearoa, moving away from an excise tax at the pump to a system based on distance travelled and vehicle weight. All light vehicles, including petrol, hybrid, diesel, and electric models, will now contribute to road maintenance and upkeep based on their usage rather than a flat tax.
Currently, RUCs apply only to non-petrol-powered vehicles and those weighing over 3.5 tonnes. However, the new policy aims to extend this system to all light vehicles, which means approximately 3.5 million drivers will need to pay RUC fees. While the exact details of how these fees will be calculated and collected are still being worked out, the government has emphasized that this change is necessary as the vehicle fleet evolves.
Why the Change?
Transportation Minister Chris Bishop described the move as “the biggest change to how we fund our roading network in 50 years.” He pointed out that the number of fuel-efficient hybrid vehicles has grown significantly, from 12,000 in 2015 to 350,000 today. This shift reflects changing consumer preferences and technological advancements in the automotive industry.
Bishop argued that it’s unfair for drivers who cannot afford fuel-efficient cars to pay more in taxes than those who can. “As our vehicle fleet changes, so too must the way we fund our roads,” he said. The decision to replace the petrol tax with RUCs was part of the National and ACT coalition agreement, and the government has been signaling this move for some time.
What Will Drivers Pay?
Under the new system, all vehicles will be charged based on the distance they travel and their weight. However, specific details about how these charges will be calculated have not yet been released. For example, under the current RUC system for light vehicles under 3,500kg, the rate is $76 per 1000km. A typical Toyota Corolla weighs between 1200-1500kg, meaning its RUC would be lower than heavier vehicles.
There is also an administration fee of around $12-$13 per transaction. While no official figures have been provided for the new system, an example given by the government suggests that a small electric vehicle could pay over $760 for 10,000km worth of credits, including fees.
Will Petrol Prices Drop?
It’s unclear whether the removal of the petrol tax will lead to lower fuel prices. Currently, petrol drivers pay about 70 cents per litre in tax, but the total cost of fuel excise, duties, and taxes like GST exceeds $1.20 per litre. However, there’s no guarantee that removing the tax will automatically reduce prices, as other factors such as global oil markets and inflation may still affect fuel costs.
When Will It Take Effect?
Legislative work on the new system is set to begin next year, with the goal of implementing the full transition by 2027. Bishop emphasized that the timeline is deliberate, as the focus is on getting the system right before rolling it out. Key legislative changes include:
- Removing the requirement to carry or display RUC licences
- Allowing digital records instead of physical stickers
- Enabling a broader range of electronic RUC devices
- Supporting flexible payment models such as post-pay and monthly billing
- Separating NZTA’s roles as regulator and retailer to promote fairer competition
- Bundling other road charges like tolls into a single payment
Bishop also mentioned the possibility of paying RUCs through an app, similar to how people pay for streaming services. The next step is to amend the Road User Charges Act 2012, introduce a bill to Parliament, and gather public input through a Select Committee.
Current RUC System
The current RUC system for light vehicles is considered “clunky” by the government. Drivers must track odometer readings, pay for RUC in 1000km chunks, and place a sticker on their windscreen. Once the odometer passes the paid limit, they must purchase more RUC. Bishop acknowledged that shifting millions of drivers from a simple pump-based system to a more complex one would be challenging, so the focus is on reforming the rules to allow market-driven solutions.
Privacy and Data Concerns
With the introduction of electronic RUCs, concerns about privacy have emerged. EROAD, one of the providers, uses GPS tracking to monitor vehicle movement. While the Road User Charges Act 2012 includes privacy protections, there are ongoing discussions about who will have access to data and how it will be used. The government has stated that location data will only be accessed for verifying off-road travel and that officials will engage with stakeholders, including the Office of the Privacy Commissioner, to address these concerns.
Private Firms and Competition
The government has also announced that private firms will take over the collection and administration of RUCs from NZTA. This move is intended to foster fairer competition, but it has raised concerns among some groups. Tax Justice Aotearoa warned that handing over responsibility to private companies could lead to higher fees for drivers. Similarly, the Public Service Association expressed worries about the lack of accountability for private organizations managing sensitive data.
Will This Save Drivers Money?
It’s still unclear whether the new system will save drivers money. While petrol prices could theoretically drop, the introduction of RUCs for all vehicles may offset any savings. Bishop called the change “a once-in-a-generation shift” that is necessary for the future of road funding. Collins from the AA noted that while some drivers, such as those with multiple vehicles or boat users, might benefit, overall costs are unlikely to decrease.
Conclusion
The transition to RUCs represents a major shift in how road usage is funded in New Zealand. While the system promises to be more efficient and technology-driven, many questions remain about implementation, costs, and privacy. As the government moves forward with legislative changes, the focus will be on ensuring the new system is fair, transparent, and accessible for all drivers.
