RUCs to apply to all vehicles (incl EVs), replacing road user tax on petrol

Forums › Transport (cars, bikes and boats) › RUCs to apply to all vehicles (incl EVs), replacing road user tax on petrol

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Master Geek
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#3136218 29-Sep-2023 08:12

OK - got as far as Page 3 and thought I'd never manage to read to the end of the thread.

From what I have read so far there are two ways of collecting road tax in NZ.

Straightforward tax on petrol where you pay each time you fill up. Not really any way of avoiding it.

Complicated tax on diesel where you have to pay separate charges in a more complicated manner at irregular intervals.
It seems that it may be easy to avoid this by accident or intent, and enforcement isn't (anywhere near?) 100% effective at the moment.

From my currently UK based view, it seems more sensible to switch to taxing diesel, not to switch petrol to the more complex system already discussed in detail in this thread.

It may not be absolutely fair to all road users, but it is very easy to collect and very hard to avoid.
If the aim is to effectively collect revenue then the simplest method is usually the best.

For people living from pay check to pay check it is a simple sum - do I have enough in my wallet to pay for fuel?
$10 or $20 or whatever - like food or drink you buy what you can afford on the day.
A system which effectively makes people criminals because they spend one week and then don't have the money in a few weeks time doesn't seem to me to be a fair and equitable system.
As I said above enforcement is likely to be patchy and ineffective.

Adding a transaction charge each time you pay the tax seems obscene.
The people most likely to be disadvantaged are those with the least money.
This doesn't even seem to be going to the roads.
Just a nice little earner for tax collectors levied on the poor.
It is worthy of a UK Tory Government. Jobs for their mates in business and to hades with the poor.

KISS (Keep It Simple, Stupid).

HarmLessSolutions

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#3136223 29-Sep-2023 08:21

LittleGreyCat:

OK - got as far as Page 3 and thought I'd never manage to read to the end of the thread.

From what I have read so far there are two ways of collecting road tax in NZ.

Straightforward tax on petrol where you pay each time you fill up. Not really any way of avoiding it.

Complicated tax on diesel where you have to pay separate charges in a more complicated manner at irregular intervals.
It seems that it may be easy to avoid this by accident or intent, and enforcement isn't (anywhere near?) 100% effective at the moment.

........

KISS (Keep It Simple, Stupid).

You appear to have missed the "(incl EVs)" in the thread title. That is the focus of this discussion and if not for non-fossil fueled vehicles oining our national fleet en masse the system would very likely remain as is.

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frankv

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#3136440 29-Sep-2023 11:43

I think there's a whole issue around the size/weight of the vehicle (and therefore the road damage it causes) vs the amount of fuel it uses. If tax is based on fuel usage, a large truck with a relatively miserly engine will pay less tax than an equally large truck with a more powerful engine, yet do the same damage to the roads. I assume RUCs are charged based on the weight of the vehicle.

afe66

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#3136453 29-Sep-2023 11:56

But are there currently enough EVs to go through changing for very large numbers if people to satisfy the small anti EV block.
Charge EV ruc at x per 1000km just like diseil and leave all the petrol users as currently.

Very large change for a very small number of vehicles especially as up take might slow with removal of the fiscally neutral and user pays current clean car rules.

Wheelbarrow01

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#3136740 30-Sep-2023 02:01

HarmLessSolutions:

Wheelbarrow01:

These incoming admin fee increases are obscene for what is an entirely automated transaction. Imagine your your power company charging $12 to electronically read your meter and post a bill to you....

The admin fee is most likely already factored into your electricity account. The fixed daily charge?

The fixed daily charge for electricity is split between the lines distribution company, the meter owner, the meter reader, and the retailer.

Actually now that I think about it, my analogy is flawed. So instead, imagine your power company charging you $12 to log into their website and tell them what your meter reading is, so you can pay them online at the same time? There is actually no admin for them to do as you are doing all the work for them, and paying for the privilege.

Lord help us if you are right though. For a power company the size of Mercury (300k+ power customers), that would be $3.6m just in admin fees every month. I am sure their Xero subscription doesn't cost them that much lol

weasel13

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Geek
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#3136752 30-Sep-2023 08:35

afe66: But are there currently enough EVs to go through changing for very large numbers if people to satisfy the small anti EV block.
Charge EV ruc at x per 1000km just like diseil and leave all the petrol users as currently.

Very large change for a very small number of vehicles especially as up take might slow with removal of the fiscally neutral and user pays current clean car rules.

If you charge EV's RUC then they will likely be paying more tax than an economical car as the economical cars tax is based on fuel consumed not distance covered.

And then there is plug in hybrids. They get stung twice with RUC and fuel tax.

Changing to RUC for all is logical. I do think they need to scrap admin fees and minimum top ups though.

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HarmLessSolutions

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#3136826 30-Sep-2023 11:01

weasel13:
afe66: But are there currently enough EVs to go through changing for very large numbers if people to satisfy the small anti EV block.
Charge EV ruc at x per 1000km just like diseil and leave all the petrol users as currently.

Very large change for a very small number of vehicles especially as up take might slow with removal of the fiscally neutral and user pays current clean car rules.

If you charge EV's RUC then they will likely be paying more tax than an economical car as the economical cars tax is based on fuel consumed not distance covered.

And then there is plug in hybrids. They get stung twice with RUC and fuel tax.

Changing to RUC for all is logical. I do think they need to scrap admin fees and minimum top ups though.

@Scott3's lead post in this thread covers off most of the relevant details of this issue. I would add though that the most logical way to boost incentivisation of EVs and economical ICEs (assuming all vehicles are charged distance based RUCs) is to increase carbon taxation of the fossil fuels. That way larger petrol and diesel vehicles are more heavily taxed, with diesel maybe even more so, and of course hybrids will advantage due to their FF economy (with PHEVs prompted to use their EV ability), and EVs will still enjoy the best deal.

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Scott3

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#3137171 30-Sep-2023 23:40

Wow, there has been a massive volume of discussion since I started this thread.

Many interesting comments.

Huge concern about the minimum size of RUC blocks (1000km, currently $76+ transaction fee).
Concern about the transaction fees. Soon these are going up to $12.44, so for a car doing the NZ average of 14,000km, buying in the min block size of 1000km, they would be up for $174.16 a year in fees. quite a dead weight cost.
General support for increased "fairness" of the per km road tax.
Some suggestions we move to a process where road tax is collected in arrears - I would oppose this, we should avoid people being in debt as much as we can.
Concern about enforcement. We would be going from a system where the bulk of the fleet needs no enforcement (that is handled at the customs-controlled fuel terminals), to one where it does.
Desire for road tax to be ring fenced for roading - I consider this argument to be unrelated to the proposed move from per liter to per km taxation. And moot anyway. Current road tax does not cover the cost of running the roading network (a lot of money comes from general tax & rates).
Concern people will simply not pay RUC (facing whatever consequences come later)
Suggestion for additional lower weight bands (the current lowest band is less than 3500kg GVM) - I don't think there is any basis for this. sub 3500kg vehicles do basically negligible road wear, so are paying for the space they occupy on the roads (most of which is following distance, not actual car size), rather than road damage.
Suggestions to drop road tax all together and fund the road out of general taxation (Income tax and GST). - I don't really like this. the road transport network costs a heap to run, and I think it's fair that those who use it a lot pay more than those who use it rarely. Also income tax has to be one of the worst taxes, it is punishing exactly the behavior we want more of as a country.
Concern about fraud & odometer tampering, which has been a long-standing issue with light diesel cars - I think this is a really big deal, swapping from near impossible to defeat tax method, to one that can be cheated could cost a lot of revenue. - Should note that some modern car's digital odometers are quite easy to change.
Dislike of the physical labels. - I agree. Mailing out bits of plastic to display in the windscreen seems antiquated in 2023.
Concern about reduced incentive to own efficient vehicles (hybrid and EV).
Desire to integrate RUC with carmaker telemetry. - I don't think NZ can be a leader in this. We are tiny chunk of the global market and are a product taker (plus a decent chunk of our fleet was intended for japan, not us). Many automakers don't even bother having their connected features work in NZ.
Suggestion that many of the issues with the current RUC system could be resolved with a system Revamp. i.e. full digital, no transaction charges, no minimum order size etc.

There are two big issues driving the need for this change:

EV's & PHEV's growing in number will eventually hit a point where having them free means an excessive revenue hit. The current exemption was only intended to cover until they hit 2% of the fleet. Plug-in vehicles are fast going mainstream. And the default solution of letting the current exemption expire would have them paying about 3x the road tax of a Yaris hybrid.
Massive boom in the efficiency of non-plug in vehicles. Yairs from 2013 was rated at 6.3l/100km. Current yairs hybrid is rated at 3.6L/100km. Rav4 AWD from 2013 was rated at 8.5L/100km. Current Rav4 Hybird is rated at 5.3L/100km.

The combined result of these is that revenue / km under the current system will be dropping fast, needing repeated fuel (&RUC) hikes, just to keep pace with the fleet getting more efficient. Hence the motive for change.

While I am strongly attracted to the increased fairness of charging all vehicles by KM (especially how recreational boaties, petrol generator users etc will no longer need to unfairly pay road tax), I am starting to think that this proposal could end quite messy, costing a lot in transaction fees, enforcement etc.

Perhaps the solution is to throw fairness to the wind in favor of simplicity/ease:

Petrol Taxed by liter as per now
Diesel RUC: 7.6c/km
Pure EV RUC: 2.5c/km (calculated and changed every year so that they pay the same tax per km as the most efficient non plug in car on the market)
PHEV RUC: 2.0c/km (80% of the Pure ev rate, to cover an assumed 80% running in electric mode. Don't allow fuel tax redunds for PHEV's).

The more I think about this, the more concerned that the RUC's on EV's could happen (at the normal rate) in April, and the RUC's on all vehicles thing will be kicked down the road, leaving the situation where EV's pay far more road tax than economical petrol hybrids.

Scott3

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#3137184 1-Oct-2023 00:17

HarmLessSolutions:

@Scott3's lead post in this thread covers off most of the relevant details of this issue. I would add though that the most logical way to boost incentivisation of EVs and economical ICEs (assuming all vehicles are charged distance based RUCs) is to increase carbon taxation of the fossil fuels. That way larger petrol and diesel vehicles are more heavily taxed, with diesel maybe even more so, and of course hybrids will advantage due to their FF economy (with PHEVs prompted to use their EV ability), and EVs will still enjoy the best deal.

The challenge we have with using fossil fuel taxation / emissions charges to drive change, is that in order to be fair it needs to hit all industries in the same way.

Should note that we already have an emissions trading scheme component in the cost of petrol / diesel at the pump, but it is way too low to drive any real change.

The push to promote EV's by policies such as the current RUC exemption is a recognition that land transport (particularly at the point of purchase of new light vehicles), is a really low-hanging fruit when it comes to emissions reduction.

Cranking the ETS fees to the sky (by shrinking the credit pool dramatically), would hammer higher emitting sectors like animal agriculture, Manufacturing and construction. Sectors that would dramatically shrink our wealth as a country if they were to shrink. Would also hammer the large, low income, rural living family with the 25+ year old van, and no prospect of getting anything more economical.

So in effect our desire to have more EV's in the fleet is largely driven by our desire to allocate our emissions to more profitable (for the country) causes, instead of road transport, and why big emission taxes aren't ideal. (and of course, it would be a hard sell to any politician to promote EV's by cranking up taxes to painful levels on 98% of the current fleet).

Handle9

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#3137185 1-Oct-2023 00:21

An obsession with "fairness" is counter productive. Every scheme will have winners and losers.

Decide what outcomes you are trying to acheive and then design the lowest contact mechanism to acheive that. Some people will get screwed but that is unavoidable.

LittleGreyCat

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Master Geek
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#3137235 1-Oct-2023 03:14

frankv:

I think there's a whole issue around the size/weight of the vehicle (and therefore the road damage it causes) vs the amount of fuel it uses. If tax is based on fuel usage, a large truck with a relatively miserly engine will pay less tax than an equally large truck with a more powerful engine, yet do the same damage to the roads. I assume RUCs are charged based on the weight of the vehicle.

Agreed.

However this was part of my point that it might not be fair, but it might be much more effective at raising revenue with minimum complexity and overheads.

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Qazzy03

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#3137265 1-Oct-2023 09:01

Handle9:

An obsession with "fairness" is counter productive. Every scheme will have winners and losers.

Taxation is one of the few tools a government has in changing a nations behaviour. It's either that or going down legislation/regulations.

Take smoking for example, the tax on that wasn't to pay for health care / hospitals. A lot of people thought it was though, the intention of the smoking tax was for the public to reduce and stop on their own without legislation aka be smoke free. While increasing the tax / cost of cigarettes increased over time it didn't stop or reduce enough and so the government introduced this piece of legislation.

This amendment means that the Smokefree Environments and Regulated Products Act 1990 (the Act) will restrict the sale of smoked tobacco products to a limited number of approved retail outlets and prohibit anyone from selling or supplying smoked tobacco products to people born on, or after, 1 January 2009.

This means less tax revenue from possible future smokers but tax was only a way of changing behaviour.

This whole idea of fairness in a system that isn't really meant to be fair in the first place. As said there will always be winners, the no RUC for EVs was meant to drive the fleet from fossil fuel, the system wasn't supposed to be fair in the first place. It was meant to change buying behaviour for new vehicles without using regulations/legislation yet. In 30 years a government may introduce a ban of some sort of fossil fueled vehicles of a certain type or age, just like smoking.

frankv

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#3137585 2-Oct-2023 10:00

Handle9:

An obsession with "fairness" is counter productive. Every scheme will have winners and losers.

Decide what outcomes you are trying to acheive and then design the lowest contact mechanism to acheive that. Some people will get screwed but that is unavoidable.

Whilst I agree that it's impossible to be perfectly fair, and trying to be will be counter-productive and expensive, I think that fairness is still an essential component. A distorted taxation regime will result in inefficiencies in the economy.... e.g. a heavy tax on (say) towbars would result in people buying roofboxes and/or larger vehicles so they can cart more stuff when they need to. So (a) more fuel is used to drive the bigger vehicles, and (b) the weight is carried on 2 axles instead of 3.

Secondly, it's OK to make people pay roughly (including slightly more than) what their activity costs the government and society, and if that's more than some people can afford, so be it. But intentionally or carelessly screwing people over just because you can't be bothered to tax them fairly is wrong.

wellygary

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#3137665 2-Oct-2023 11:26

Scott3:

Perhaps the solution is to throw fairness to the wind in favor of simplicity/ease:

Petrol Taxed by liter as per now
Diesel RUC: 7.6c/km
Pure EV RUC: 2.5c/km (calculated and changed every year so that they pay the same tax per km as the most efficient non plug in car on the market)
PHEV RUC: 2.0c/km (80% of the Pure ev rate, to cover an assumed 80% running in electric mode. Don't allow fuel tax redunds for PHEV's).

The purpose of RUCs is to pay for road usage, and this is a function of Weight....

There is no justification for letting pure EVs have a RUC rate of just over 1/4 the regular diesel rate when the most popular EVs (Model 3/Y) have weights or 1700-2000kg, which is heavier than a RAV4...

[ Whether there should be a sub 2T RUC category is another debate, but it should be uniform across bot Diesel and EV vehicles,]

I agree that some form of proxied rate for PHEVs is probably the easiest solution

HarmLessSolutions

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#3137671 2-Oct-2023 11:34

wellygary:

Scott3:

Perhaps the solution is to throw fairness to the wind in favor of simplicity/ease:

Petrol Taxed by liter as per now
Diesel RUC: 7.6c/km
Pure EV RUC: 2.5c/km (calculated and changed every year so that they pay the same tax per km as the most efficient non plug in car on the market)
PHEV RUC: 2.0c/km (80% of the Pure ev rate, to cover an assumed 80% running in electric mode. Don't allow fuel tax redunds for PHEV's).

The purpose of RUCs is to pay for road usage, and this is a function of Weight....

There is no justification for letting pure EVs have a RUC rate of just over 1/4 the regular diesel rate when the most popular EVs (Model 3/Y) have weights or 1700-2000kg, which is heavier than a RAV4...

[ Whether there should be a sub 2T RUC category is another debate, but it should be uniform across bot Diesel and EV vehicles,]

I agree that some form of proxied rate for PHEVs is probably the easiest solution

In terms of simplicity and fitting the purpose of road cost collection a single RUC rate for all vehicles under 3.5T makes sense.

An adjustment to the carbon taxation of petrol and diesel then could be used to address disincentivisation of fossil fuels, obviously with RUCs removed from the pump price.

https://www.harmlesssolutions.co.nz/

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