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New Zealand simplifies Road User Charges system, extends exemption for light electric motor vehicles from 2013 to 2020
14 June 2012
New Zealand is implementing revenue-neutral changes to its road user charges (RUC) system as of 1 August 2012. In New Zealand, diesel and electric-powered vehicles pay for their road use through road user charges. (Since some 36% of diesel is used off-road, such as on farms, by manufacturing, industrial and commercial ventures, and boats, a fuel tax for road use would impose an unfair burden onto these sectors, the government says.)
On the other hand, gasoline, CNG and LPG powered vehicles pay for road use through fuel excise duty charged directly on the fuel they use. All revenue from excise duties and the RUC goes into the National Land Transport Fund along with revenue from motor vehicle registration and licensing fees. The fund—which was approximately $2.65 billion in 2010/11—is used mainly for road construction and maintenance, along with other activities benefiting road users.
Among the modifications to the RUC, the New Zealand government has extended the current exemption for light electric motor vehicles from the requirement to pay road user charges—enacted in 2009 and due to expire in 2013—to 2020. The exemption applies to any motor vehicle the power of which is wholly (i.e., battery electric) or partly (i.e., plug-in hybrid) derived from an external source of electricity and the gross laden weight of which is 3.5 tonnes or less.
New Zealand intends for the exemption of light electric motor vehicles to function as a kick-start for electric vehicle technology. While diesel-powered vehicles offer fuel economy benefits over gasoline-powered vehicles, the government notes, diesel technology is already well established. The proportion of diesel vehicles in the New Zealand fleet has increased from 13% to 16% over the period from 2003 to 2009.
However, should plug-in hybrid electric vehicles using diesel as a secondary fuel become available, they too would be eligible for the exemption.
Overall, the RUC changes will simplify the process, according to Transport Minister Gerry Brownlee, while recovering the same total amount of revenue for the National Land Transport Fund as under the current system—although changing vehicle weight definitions means that all vehicles will have a different charge.
Other regulations have been developed to enable every heavy vehicle to be given a permanent road user charges weight and supplementary licences to be discontinued; removal of the time licence system; changes to the current exemption regime; and a reduction in the administration fee payable when purchasing a road user charges licence.
Currently a vehicle operator has to estimate the maximum laden weight of their vehicle for a journey, and purchase a corresponding road user charges licence.
These system changes will create a number of benefits including reduced compliance costs, time savings for all transport business operators through the simplification of licence purchases, and less complex roadside enforcement checks.
Moving to a permanent weight system with weight bands will greatly simplify this process. These changes will also encourage the most efficient use of vehicles and remove the opportunity to purchase road user charges licences for less than the actual weight of the vehicle.—Gerry Brownlee
Removing supplementary licences and time licences will also result in compliance cost savings.
Most vehicles currently required to purchase time licences will be exempt, while changes have been made to the exemption regime to more closely link exemptions to the suitability of a vehicle for regular road use.
Overweight vehicles will have the option to purchase additional road user charges for individual loads, or obtain a type H road user charges licence, designed for vehicles that run overweight most of the time.
The charge for some individual vehicles will be greater and some lesser than at present. For lighter vehicles the effect is relatively minor, but as there is more variation in the current charges for heavier vehicles the effects of simplifying the charging scale for these vehicles will also be greater.—Gerry Brownlee
Road user charges rates will also be affected by an increase of 4.1% (on average) on 1 August 2012. This is equivalent to the two cent per liter increase in gasoline excise duty that will occur on the same day.
An increase in gasoline excise duty and road user charges of 1.5 cents a liter was originally scheduled to take effect in July 2011. However, the government deferred the increase due to the challenging economic circumstances New Zealand was experiencing as it continued to recover from the global financial crisis and the Canterbury earthquakes.
A two cent increase in gasoline excise duty will increase average running costs for an average gasoline vehicle by around $30 a year, or 0.9%. The financial impact is similar for a light diesel vehicle subject to road user charges.
The cost of road user charges represents about a tenth of the total costs of a road freight operator, therefore an average road user charges increase of 4.1 per cent is estimated to increase the total cost of truck operation by around 0.4%.
The 4.1% average increase is distributed in accordance with the Ministry of Transport cost allocation model, which allocates costs between vehicles of different types and weights, according to the costs they generate for the road network.
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