Green’s gas-guzzler policy misguided

10 May 2006

Green’s gas-guzzler policy misguided, says Institute

Proposals by the Green Party to raise registration charges on large cars and reduce them on small cars are seriously flawed, says the New Zealand Institute of Chartered Accountants.

Craig Macalister, the Institute’s Tax Director, says that owners of vehicles with larger engine sizes that consume relatively larger amounts of petrol are already facing a substantial disincentive in the rising cost of fuel and the existing associated taxes. “There is no suggestion that this market mechanism is failing. Indeed, the response of New Zealanders to the oil shocks of the 1970s show that fuel price does have an impact on decisions about car size and use.”

“In comparison, increasing registration costs is unlikely to lead to any major behavioural change,” says Mr Macalister. “People own large cars for a whole list of reasons that will not change because of higher registration fees: family size, the need to safely travel distances, or the wish to tow a trailer or the family caravan – in fact, the law now requires a larger vehicle to tow trailers of varying sizes.”

There is already a clear market signal to switch to vehicles that consume less fuel: there is no need to add further costs onto these motorists. Further, the downstream effects of this policy proposal do not appear to have been considered thoroughly.

ENDS

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