Petrol Tax Debate Misleading Public

9 February 2005

Petrol Tax Debate Misleading Public

Parliamentary exchanges over the Customs and Excise (Motor Spirits) Amendment Bill add more heat than light to the issue of road funding and taxation Automobile Association Public Affairs Director George Fairbairn said today.

“The Government has accused the Opposition of voting against funding road construction while the Opposition accused the Government of hiding hefty taxes on fuel until after the election. In the sense that the current system will not fund the foreseeable transport needs of the country and that the Government may possibly defer significant increases in the price of fuel until after the election both Parties are correct.”

“The AA believes that the Government’s current progress toward the targets of the 2010 Road Safety Strategy is unlikely to achieve its targets, as is progress towards relieving congestion in major metropolitan centres. The problem is that the combination of a pay-as-you-go funding regime and an extremely slow consents process cannot deliver results within an adequate timeframe. In the eight years it takes for an urban consent to be obtained 100,000 new vehicles will be added to Auckland’s traffic gridlock. Similarly it will take decades before the Waikato Expressway or Transmission Gully replace the dangerous roads we have at present.”

“At the same time motorists have experienced a 13 percent increase in the cost of petrol last year due to rising world oil prices. The average motorist is not keen to see Government increase its taxes on petrol from 54.2 cents per litre to 59.7 cents per litre with taxes indexed to inflation every year from 2007. This raises the question of a specific tax now being indexed and whether other taxes may be treated in a similar manner. This indexation is being raised when the Government is only proposing to spend 23 cents of this on transport, and with an annual fiscal surplus of around 6% of GDP.”

Mr Fairbairn said that the AA had engaged some of the best economists in Australasia and provided the optimal solution when it published the Allen Report last year. That report found that Government borrowing for major and essential projects would result in increased economic activity and taxes.

“There is a need for new road developments as the Government has rightly pointed out, but there is no need for painful tax increases to pay for them either, as the Opposition says. What is really needed is less petty debate and a more creative response to the problem of improving the safety and efficiency of the transport system,” Mr Fairbairn said.

ENDS

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