Final report on retail fuel market recommends 'terminal gate pricing regime' similar to in Australia, requiring all importers to offer a 'spot' price; Govt aims to 'break stranglehold' of big fuel companies

Final report on retail fuel market recommends 'terminal gate pricing regime' similar to in Australia, requiring all importers to offer a 'spot' price; Govt aims to 'break stranglehold' of big fuel companies

The Government says it is going to set about breaking the big fuel companies’ "stranglehold" on supply and getting more competition into the retail fuel market for the benefit of consumers.

The Commerce Commission on Thursday released its final report on the retail fuel market in New Zealand and has made recommendations aimed at creation of an effective wholesale market for fuel.

The commission believes creation of such a market will improve competition by creating the potential for a liquid spot wholesale market to develop, lower barriers to entry and expansion for rivals, provide greater price transparency for wholesale customers, and provide competitive benchmark information for industry and government.

The Government had late last year asked the commission to carry out the inquiry on the grounds that it believed the public were paying too high a price. 

The commission had affirmed in its interim report in August that the public was paying a higher price than it should at the pump.  It reaffirmed these conclusions in its final report, with commission chair Anna Rawlings saying many fuel companies have been making "persistently higher profits over the past decade than we would expect in a workably competitive market".

"For consumers, this means they are paying higher pump prices than could be expected.”

In response Minister of Energy and Resources Megan Woods amd Consumer Affairs Minister Kris Faafoi said the Government accepted the commission's findings and "we’re ready to act on them".

The Government will now take the Commerce Commission’s recommendations to Cabinet with a view to swiftly implementing changes, such as:

  • A more transparent wholesale pricing regime
  • Greater contractual freedoms and fairer terms to facilitate wholesale competition
  • Introducing an enforceable industry code of conduct
  • Improve transparency of premium grade fuel pricing

“We will look to require that retailers display both regular and premium petrol prices on service station price boards, and I’ll be encouraging retailers to make those changes as soon as possible,” Faafoi said.

This is the release from the commission:

The Commerce Commission has released its final report into the retail fuel market and has recommended changes to stimulate competition and benefit consumers.

In December 2018, the Government asked the Commission to undertake a study into factors affecting competition for the supply of retail petrol and diesel used for land transport in New Zealand. This followed public concerns about whether consumers were getting a fair deal at the pump. A draft report was released in August 2019 for consultation, with a final report now delivered to Government for their response.

“As a result of our study, we consider many fuel companies have been making persistently higher profits over the past decade than we would expect in a workably competitive market. For consumers, this means they are paying higher pump prices than could be expected,” Commission Chair Anna Rawlings said.

The Commission used a range of indicators to assess the profitability of fuel companies. This includes import margins more than doubling over the past decade, fuel company returns double the Commission’s estimate of a reasonable return, some new retail sites being paid off unusually fast, and fuel companies market values being significantly higher than their physical costs to build.

“There are indications that returns have peaked and are stable. However, profitability is expected to remain high for some time and we are not convinced that the industry’s experience of excess returns has come to an end under current policy settings.”

The Commission also made other observations during its study which indicate the market is not working as well as it could for consumers. These include:

•    Regional differences in retail fuel prices reflecting the level of local competition 

•    Discounting and loyalty schemes being used to avoid direct competition on board prices, and

•    An increasing difference between regular and premium petrol margins which are not all explained by cost differences. 

The Commission believes the core problem is that an active wholesale market for fuel does not exist in New Zealand. 

“The major fuel companies, Z Energy, BP and Mobil, share a joint infrastructure network which includes the Marsden Point refinery, coastal shipping operations and storage terminals at regional ports. They use this network to supply 90% of the nation’s fuel through their own branded retail sites or via other distributors or resellers via exclusive long-term wholesale supply contracts. The only other fuel importer is Gull, with a terminal in Mt Maunganui,” Ms Rawlings says. 

“The combination of infrastructure sharing and restrictive supply relationships gives the major fuel companies an advantage. There is a reduced ability for importers to compete for customers of the majors and for distributors and dealers to obtain competitive wholesale supply terms.” 

The Commission acknowledges there are some positive industry developments underway. These include fuel company innovations like pay at the pump technology benefiting consumers, the establishment of Timaru Oil Services new import terminal in Timaru, expansion by Gull and resellers including Waitomo and NPD, and the electrification of vehicles. 

“While these developments could improve outcomes for consumers over the long-term, they do not address the core problem we have identified with the wholesale market.” 

The Commission has made a series of interdependent recommendations to improve competition, mainly targeted at creating an effective wholesale market.

The Commission recommends introducing a Terminal Gate Pricing Regime, based on the Australian equivalent. This requires all importers to offer a spot price at which they will sell fuel to wholesale customers at storage terminals. 

“We consider this regime will improve competition by creating the potential for a liquid spot wholesale market to develop, lower barriers to entry and expansion for rivals, provide greater price transparency for wholesale customers, and provide competitive benchmark information for industry and government.”

The Commission also recommends regulating wholesale supply contracts to allow greater contractual freedom for resellers to compare offers and switch suppliers by:

•    Requiring clear and concise language and transparent pricing

•    Limiting the use of long term and exclusive supply contracts

•    Assessing the use of other potentially restrictive contract terms.

These two recommendations would be implemented via an enforceable Industry Code of Conduct. 

To improve competition in retail markets, the Commission has made several recommendations to help consumers make more informed purchasing decisions. These include regulations to require retailers to display premium fuel prices on price boards and fuel cap stickers to help consumers understand what grade of fuel their vehicle requires.

The Commission has also made a series of other supporting recommendations. This includes improving information and record keeping about the fuel market for future analysis, as well as encouraging major fuel companies with shared infrastructure arrangements to:

•    Publish the criteria and the process for participation in the arrangements

•    Review aspects of the arrangements that may disincentivise investment in shared storage

•    Review information sharing about the arrangements to reduce the potential for coordination.

The full report, executive summary and infographics showing our key findings and recommendations are available here

More information about market studies are available here.

And this is the release from Woods and Faafoi:

Consumers will benefit from a more competitive, transparent retail fuel market as a result of changes the Government will be making in response to the findings of the Commerce Commission’s study of the fuel sector.

“We accept the Commission’s findings and, as the Prime Minister has said, we’re ready to act on them,” the Minister of Energy and Resources, Megan Woods, said on Thursday.

“The report confirms our concerns that consumers are paying higher prices for petrol and diesel than could be expected in a competitive market. The changes we make will address that, and we expect those benefits will flow through to motorists,” Commerce and Consumer Affairs Minister, Kris Faafoi, said.

“The Commerce Commission’s study found a lack of competition in wholesale markets. We’ll be introducing the best options to increase competition at a wholesale level, which will filter down to the retail market and prices on the forecourt,” Minister Woods said.

“A more competitive wholesale market means that low cost brands, like Waitomo and NPD, would be able to access cheaper fuel and pass these benefits onto consumers. Other retailers would be forced to adjust their prices or risk losing customers,” said Dr Woods.

“The report also found that fuel dealers and distributors have limited ability to switch suppliers due to restrictive terms in their contracts. We’ll look to introduce a mandatory industry code to regulate the conduct of participants in the fuel industry.

“This is about breaking the big fuel companies’ stranglehold on supply and getting more competition into the market to benefit consumers,” Dr Woods said.

The Government will now take the Commerce Commission’s recommendations to Cabinet with a view to swiftly implementing changes, such as:

  • A more transparent wholesale pricing regime
  • Greater contractual freedoms and fairer terms to facilitate wholesale competition
  • Introducing an enforceable industry code of conduct
  • Improve transparency of premium grade fuel pricing

“We will look to require that retailers display both regular and premium petrol prices on service station price boards, and I’ll be encouraging retailers to make those changes as soon as possible,” Minister Faafoi said.

“We also see merit in adding premium fuel prices to the Ministry of Business, Innovation and Employment’s current monitoring of regular grade petrol and diesel margins so consumers have a better awareness of price trends.

“The report has found there is action required in several key areas and the steps we’re going to take to address these will make the retail fuel market fairer for all New Zealanders,” he said.

Both Minister Faafoi and Minister Woods thanked the Commerce Commission for their work on this first market study.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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138 Comments

23
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Oi ! ... Taxcinda : we are being fleeced , right royally ripped off at the petrol pump ... and it is by you ... and by your predecessors .... by all the governments who've added one excise atop another until 50 % of the pump price is pure profit for the government ...

... another tax which pings the middle and poorer income folk more than it soaks the rich ...

You are the problem , front and centre Miss PM ... you are ...

Agreed. One obvious replacement tax to Petrol Tax, to keep the Government coffers balanced could be...No...I dare not utter its name...

.. I dare name it : Land Tax !

Brave you! And in daylight hours and all...

About as dangerous - user pays roading charges?

Imagine a world where we stop subsidising the wealthy to own land and drive everywhere.
Crazy.
Hosking and Richardson would spew.

Would that be more efficient than the current petrol tax? Current system has the benefit of punishing inefficient vehicles, although I suppose congestion charging can be made to do the same. Petrol tax certainly seems easier to collect.

+1 for the land tax though.

How does the current petrol tax system punish inefficient vehicles?
It is broad based and flat. The disincentive for inefficiency comes from the commodity price of the fuel, not the tax component.

Agree a broad tax is simple and easier to collect.
But RUCs are not a difficult thing to collect anymore either with modern technologies.

More efficient vehicles with the same usage pay more tax. Tax is linear with fuel usage, so inefficiency is punished by the tax component as much as it is by the commodity price.

Admittedly, you can go much further with other systems (e.g. the centre of London is free to enter for low emissions vehicles, $25 for most cars and $200 for trucks).

I'm sure technology exists for RUCs (as you posted about eroad further down the page), but someone has the pay the middle man and I believe that solution requires additional hardware or software? Doable, but surely more complex than telling retailers to give the government $x for each litre they sell?

Fuel tax isn't ad valorem on the commodity price, yo.
It's a fixed allocation. i.e. if commodity prices drop, fuel price decreases but excise doesn't change. Thus, the incentive is to drive more inefficiently (given a fixed budget constraint, etc).
Conversely, fuel commodity prices increase - again tax (excl. GST) doesn't change - incentive is to decrease usage.

So. Again. No. Current taxation approach does not specifically punish inefficient vehicles.
The incentive to drive at the margin is mediated primarily by the market price of raw fuel because you face, effectively, a fixed cost in tax.
Change the cost of fuel at the margin for inefficient vehicles, and you target them specifically.

I'm not getting your argument. Of course, changing commodity price will change the incentive, but I don't see how a high tax on petrol doesn't drive efficiency - even if the amount is fixed. At the extremes, if we charged a fixed $100 per litre tax on petrol, that would be an extremely strong incentive to buy a more efficient car, almost certainly electric.

Because consumers have different preferences and vehicles are not homogenous.
If everyone faces the same marginal tax rate, no one is incentivised to change their behavior over another.

It may be a bit of a blunt instrument, but you can certainly change behaviour with a blanket tax. Petrol tax, cigarettes, minimum charging for alcohol - it doesn't seem to be an uncommon approach.

What are you envisioning? RUC charged per mile based on the emissions of the vehicle? Certainly could be more targeted as you can increase price more than linearly for those choosing less efficient vehicles, but the downside is increased complexity and cost to administer the tax.

But they don't 'punish' extant consumers differently. Like you first claim.
Yes. They can force substitution, but there is not specific 'punishment' for consumption of one type over another.
You originally stated that they 'punish' inefficient vehicle users when they in fact punish all types of consumers equally.

If petrol prices increase, it may punish me as a petrol mower owner to the tune of a few dollars a year - not enough to force a change. If my friend owns an inefficient car and is an Uber driver, it pushes him to consider a less polluting car as he is a high user.

My fleet of efficient trucks suffers less than your fleet of older, inefficient trucks. Increase the price enough, and you have to update your fleet or be uncompetitive. Sure, both our petrol bills may increase by the same percentage, but if mine was smaller in the first place I'm less exposed.

Hmmm.
I don't know if you understand punitive taxation.

What is your definition of punitive taxation? It appears to be somewhat different to the common use of the term, but I'm curious to learn.

Punitive taxation is to punish use.
A flat petrol excise punishes all vehicle owners equally. You are confused to think that this punishes the marginal mile for 'efficient' and 'inefficient' cars differently. It does not.
A punitive tax for inefficiency would be a higher excise on fuel for 'inefficient' cars.

Regardless of the fact that with the current system, an inefficient car pays more tax for that marginal mile than an efficient car does? Are we specifically caught up on whether the inefficient car should be taxed more in % terms rather than purely in absolute terms, in order to be regarded as more punishing?

Regardless of the fact that with the current system, an inefficient car pays more tax for that marginal mile than an efficient car does
Yes. But that is not punitive on the part of the taxation system. As you first claimed.
In order for it to be punitive, it has to attack some behavior differently. It doesn't.

So the current tax regime on cigarettes is not punitive, because everyone pays the same tax per cigarette? I'm not yet convinced this is an important distinction - it still encourages people to reduce use and switch to alternatives.

You're confusing it again.
We are only talking about consumers who are subject to the consumption.

Excise tax is punitive on cigarettes is not punitive to different demographics of smokers.
i.e. If you have lung disease and smoke, the cost of a cigarette is the same as a 18 year old with no health problems.
This is the same argument as an 'efficient' and 'non efficient' vehicle.

Petrol tax isn't fully user pays anyway:
a) It only covers 50% of cost of local roads (the rest comes from rates) and doesn't cover big projects (RONS) paid for by general tax.
b) It doesn't cover the cost of land use. Land is given to cars for free.
c) It doesn't fully cover other costs or roads: pollution, deaths, injuries, etc.
I can't quite understand why people whinge so much about fuel tax when driving is already so subsidised.

Then increase petrol tax. Happily the government is already on the case, but it's slow progress - not expensive enough to act as a proper disincentive.

Can't imagine why people don't like being told off for being upset when something they need to get to work and earn a living ends up costing more. Almost like there's a standard of living component to it or something.

There is a difference between being upset, and complaining about being ripped off by the government (Taxinda etc) when in fact you are being heavily subsidised. The people being ripped off are the ones that don't drive much such as the elderly and those that choose to live near work.

I see National have started on the lies again: "the extra revenue the Government has collected from increased fuel excise, road user charges and the Auckland Regional Fuel Tax has already hit $565 million" - doesn't that money go straight to Auckland Transport Chris Bishop, how come you forgot to mention that?

Committed to the cause : I want to see a tax that effectivity targets the rich ... is simple... and is comprehensive , unavoidable by them ...

No GBH its not the Rich per-say who are the issue its govt politicians in my opinion.
Term limits for them would reduce the kick backs and rubbish laws, no more career politicians.
You target and destroy the Rich what happens, look at France they all left and took businesses with them !

. . I'm talking about shifting the balance of the tax scales away from heavy reliance on wages and business profits ( the productive economy ) , towards the barely targeted natural resources ( land/ air / water ) ... it is not about destroying anyone , that is insane ... it is about nipping some of the gradual unearned increase in land values back from wealthy folks...

11
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The elephant in the room here, which the government would prefer to ignore yet again, is low-skilled immigration.
We're continue to bring in unskilled migrants in the thousands each month who contribute less into our tax coffers compared to what they gain in social infrastructure and public services. We haven't even come close to pricing up the net burden of low-wage migration and the influx of their dependents on the long-term sustainability of our public services and living standards.

There are a handful of sweatshop owners and land/property bankers that are greatly benefiting from this arrangement while the tax load to cover this widening deficit is incrementally falling on the net contributors to the system.

Not to mention that they can now also bring in their no-skilled elderly parents, who automatically get free medical care, and qualify for a pension after 10 years despite not working a day or paying any taxes.

It's about time we started taxing air, and all the cows farting into it. Cheaper petrol means it wont cost me so much to sit in traffic every day as I commute to the gym and starbucks.

Any land tax will simply be passed on to tenants in the form of higher rents, so poor people will be disproportionately punished. Plus wealthy people will simply sell up and move their capital offshore, or put it into alternative asset classes.

No, RUC for all cars whether they be Diesel, Petrol, Electric or powered by GBH's farts. And at a high enough price that it pays for all road maintenance, and the majority of new roading too.

Ring-fence it regionally and you've got yourself a deal.

How is a RUC system going to be more efficient than simply applying tax to the petrol price directly?

The only reason the RUC exists is because there are many uses of diesel that don't directly go on public roads. Usage of petrol not on public roads is less.

There are many uses of petrol that don't go on road too. Boats, Garden equipment, off-road bikes, generators etc. And the process to claim back the road taxes on petrol is cumbersome.
And many road users that don't use (enough) petrol to pay their fair share of roading costs, hybrids and EVs.

Why not one all encompassing system that covers everybody?

"Why not one all encompassing system that covers everybody?"

Because it's less efficient.

'efficient' for whom.
In terms of individual welfare, it is most definitely an efficient solution.

So you want to make everyone faff around buying RUC stickers for their cars? That's a huge amount of administrative overhead to raise the same amount of revenue.

As per my comment, below.
It isn't 1976 anymore. Your objection is based on an archaic thinking of how RUC would need to be administrated.

https://www.eroad.co.nz/nz/solutions/ruc-compliance/ten-ways-eroads-ruc-...

So you want every driver in the country to sign up to use a 3rd party company to manage RUCs, which appears to require a computerised gadget placed in the car that can connect to mobile data to record mileage? Is the government going to pay for these gadgets for everyone or are private car owners expected to pay for them? What happens when there's inevitable faults with these units, or someone hacks them or otherwise abuses them to record and report false data? Who is going to enforce all of this?

How is this more efficient than just having petrol excise, again?

Cool. Again more archaic thinking.
The world is moving on without you, Lanthanide, and at a rapid pace.

Better catch up if you are under 50.

Excellent idea. The Singaporean implementation has devices that are sold along with a licence to own a car that can cost as little as $50,000 per car. Given that we have slightly more land mass we may need to spend quite a bit more on the automated scanning stations than they did, but the capex will be worth it in the long run. The cost of the device along with the contribution towards the infrastructure to monitor it will likely reduce the number of pollution making cars on the road!

OK Boomer.

Am a software developer in my 20s... Unrealistic expectations of technology is characteristic of a small subset of boomers who swing too far in the opposite direction in an attempt to “keep up with the times”. One of your primary issues will be ensuring that the whole system stays up to date and secure across multiple versions running on potentially differing hardware (as the physical units get updated) whilst also being impossible to fake/emulate. Unlike cellphones most people are going to expect to be able to keep the devices in their car for the life of the car so you won’t be able to use system on chip encryption lest the older versions become a vulnerability as encryption improves. Keeping any form of hardware encrypted device that has monetary value for more than a few years at a time means that you run the risk of ASIC devices being designed specifically to beat them! OK BOOMER ?

I was being facetious with the "OK boomer".
It was mainly in response to the misunderstanding as to why car ownership is so expensive in Singapore. It isn't as you imply to cover the cost of infrastructure; it is a governmental market intervention to artificially keep car ownership and the associated externalities low.

I work in IT and am under 40, so yeah, I think I have a good handle on just how realistic your proposal is - giving every car in the country a gadget to record its mileage so the correct amount of tax can be levied by the government because this is somehow more efficient than just increasing the petrol price to capture the same tax revenue.

You know how people have concerns about Facebook, Google and privacy? Imagine what putting a location tracker in everyone's vehicle is going to be like...

In other words this suggestion of yours is not even half-baked, it's a complete non-starter.

You know how people have concerns about Facebook, Google and privacy? Imagine what putting a location tracker in everyone's vehicle is going to be like
Ahh probably the same amount of concern as every person carrying around a smart phone?

c'mon man; You're in IT!

My phone doesn't report data to the government. These car gadgets will. Also you can turn off location services on your phone. The entire point of these car trackers is to track your location.

Yes, I am in IT, I'm able to think beyond just the first step of a problem.

But why is it so wrong to be tracked when you are using a public good?
Do you tell the policeman when he pulls you over not to report the location of the offence to the government?

That's just a crazy position to take that we have a right to complete anonymity when using public goods.

In my experience, IT personnel are in fact the most incompetent at looking at the big picture. Very compartmentalized by nature.

That anonymity does not exist anyway - we have number plates , do we not ?

And those licence plate reading cameras (installed roadside and in police vehicles) definitely do not read them, either.

Lanth seems to think that driving your car on a public road is a right and not a privilege and as such the government has no business knowing where you are driving.
Categorically false.

So your argument is: who needs privacy anyway?

I guess you're in favour of China's new requirement that anyone buying a new cellphone or cellphone plan have their photo taken, so that the government can use facial recognition technology to track where everyone goes in the country, because it's all public property so who cares if the government is able to track your every move.

But why is it so wrong to be tracked when you are using a public good?

How is my private vehicle a public good? Those trackers you linked to are used to detect when you've gone off-road, so specifically don't need to be paying RUC.

Do you tell the policeman when he pulls you over not to report the location of the offence to the government?

So you're saying that when a policeman pulls you over for a traffic offense they record your location, and somehow you think this is equivalent to the government tracking your location at all times, even when you have not committed any offenses?

That's just a crazy position to take that we have a right to complete anonymity when using public goods.

Anonymity is not the same as being tracked. They are different things.

Seems you're in favour of 1984.

My argument is not that.
My argument is that driving is a privilege, not a right. If you use our public roads, there is no right to anonymity as to how and when you use them.
This tracking is already happening. Not to the same extent. But if your argument was seriously that you didn't want to be tracked whilst driving, you wouldn't drive anywhere.

Yes. Off road use is an issue.
However, the amount of users who take their vehicles off public roads is completely benign in the scheme of things.

Being tracked at specific locations or after specific events is entirely different from being tracked 24/7. It's kind of silly that you're suggesting they are the same thing and that if someone is happy to be tracked at particular spots, they won't have any problems at all being tracked everywhere they go.

Furthermore once a government has surveillance data, for whatever original purpose it was collected for, it WILL (eventually) be abused, such as cops or courts deciding that it would be really nice to get access to that data to solve some crimes - maybe that's justifiable. But what about getting that data so you can track the whereabouts of people whose political opinions you don't like - such as pro-euthanasia groups who were traffic-stopped by police, or left-wing activists being surveilled by police? Be nice to find out whether your political opponents have been visiting brothels, or who might be having marriage troubles, whose gone off to see a health specialist for something.

And this is just one issue, you've simply ignored the whole problem of the expense of the system, what happens when it is faulty or deliberately hacked, who is going to fix issues or enforce the system being hacked, etc.

All so that you can end up with exactly the same total amount of excise being collected anyway - if you're more accurately tracking who needs to pay RUC and aren't charging excise for petrol used in lawn mowers, the total amount of excise collected will go down. Except the roads still cost the same amount to repair, so the government will simply put the excise rate up to account for the lower overall revenue. You haven't achieved anything except make the whole system less efficient.

You don't require trackers in personal vehicles. They already have a distance recorder built in (odometer), and thats all you need unless you are spending a lot of time off public roads.

and thats all you need unless you are spending a lot of time off public roads.

Which is the whole argument here, that because petrol is used for non-public road things having an excise tax means money is collected from people using petrol in their lawn mower that goes to road upkeep, even though no roads were used by the lawn mower.

If you're just going to rely on the distance travelled on the odometer, then you've just shifted the problem - now people who drive off-road are paying for road upkeep when they weren't driving on public roads.

Replacing one problem with another, and adding a huge burden of administration on top, isn't efficient or effective.

Furthermore the government requires a certain amount of money to fix the roads. When they need more money, they put the excise up. If you were able to more accurately exclude petrol used in lawn-mowers (and boats, and whatever else) from the excise tax, the total money raised would be reduced. So the government would then put the excise tax up to compensate for that. All you're doing is making things less efficient than they are now, to collect the same amount of tax.

"If you're just going to rely on the distance travelled on the odometer, then you've just shifted the problem - now people who drive off-road are paying for road upkeep when they weren't driving on public roads."

The amount of time passenger cars spend off road is miniscule. And they can go to the e-road system for the few people who do actually spend a lot of time off the road. Your still talking about RUCs being inefficient, they aren't, and they will become the universal system as we go EV anyway, so just get the hell on with it.

I didn't say they were inefficient, I said they were less efficient than the current system. Not the same thing.

Whatever way you work it, they have more administrative overhead. Just because changes will have to happen with EVs, eventually, doesn't mean the whole system needs to change right now.

Nope, you could eliminate the stickers and use a smartphone app for private passenger vehicles, or run an accrual system so the owner is liable and gets invoiced when the car is taken in for its WOF, or sold. Its all linked to the NZTA database anyway.

e-road is fine for heavy vehicles, particularly those that go off-road so don't need to pay RUCs for a significant part of their travel (logging trucks etc)

Its where it is going to end up, more and more cars will go hybrid and EV as time goes on so it'll have to happen anyway. No reason hybrids should be subsidised on their paying for roads just because they use less gas but do the same amount of damage to the roads.

That only makes sense if we introduce a carbon tax to account for the environmental damage done by Combustion engines. The ultimate goal should be something that heavily discourages people from pumping pollutants into the air that other people have to breathe.

yep, that can be a straight tax on petrol/diesel because it doesn't matter whether you are burning it on road of off road, it has the same effect.

Perfect! Let’s remove the road usage flat tax on petrol and replace it with the same amount in carbon tax and the same again in negative health impact tax (because the pollution tends to happen in populated places). Super easy to administer given that it is applied as a flat rate on petrol!

no, remove the road funding tax on petrol and put it onto car as RUCs, then add a carbon tax to encourage people to move away from petrol and diesel.

12
up

Replacing one tax with another tax is not what is needed.
We need to reduce the TAX burden caused by in-efficient and in-effective govt !
How about reduce the cost of MP's, no more free air travel for life, 3 year term limit period and then your done.
No more career politicians which get appointment over and over to SOE (yeah I'm talking about you Cullen and the rest from both sides)

"Replacing one tax with another tax is not what is needed."

Cool, no more roads then? duno if you've figured out how the world works but "stuff" costs money, if you want "stuff" you'll need to pay for it somehow.

GBH is talking about moving the pertol tax to a land tax.
I'm saying why replace one tax with another un-related to cars land tax?
You saying thats a good idea ?
I've not said no tax or no roads so don't follow your logic.

Last time i checked roads were used to enable access to your land? And built on land?

But to be fair, i thought it was just another of your typical I hate taxes whinges..

Yeah apologise Pragmatist for having an opinion.
We have land tax already for this for households / business which most of us call rates.

Your welcome to have an opinion, just don't expect to have everybody agree with it, particularly when its always reduce tax.. and when we need serious amounts of expensive infrastructure investment to catch up with the rest of the first world and population growth.
No those are rates to cover the costs of providing services to you/your property and are a local govt thing.

"How about reduce the cost of MP's, no more free air travel for life"

Ok, that might pay for 1km of new road per year. What other bright ideas have you got?

"3 year term limit period and then your done."

Oh, I see, you want to ensure that we're governed by an ever-rotating band of people only doing the job for the money, who don't have to care about consequences of their decisions and actions because they're only there for 1 term maximum anyway. Good way to ensure that you only get total numpties in Parliament because anyone competent would get a job with better security - and being an MP is already considered quite a precarious job position (hard to get bank lending for a house loan on your MPs salary as it could dry up tomorrow).

Pay for roads, umhh we already have petrol tax, maybe that will pay for ummhh roads.
"total nupties" you mean like the current govt ?
MP's not getting loans, are you joking....how did Jacinda buy two multi-million dollar properties in Auckland and the rest of them having multiple houses ?

> MP's not getting loans, are you joking....how did Jacinda buy two multi-million dollar properties in Auckland and the rest of them having multiple houses ?

The PM earns significantly more than a run of the mill MP. 500k or so if I remember correctly.

Plus, even if she's a single term PM there's guaranteed to be lucrative executive and directorship positions on offer in the private sector. I'm sure whichever bank she's with would be happy to throw a fancy job title her way.

GBH and bw - the petrol tax regimes predate the current Government by several Governments. Yes the current Government upped the tax on petrol, but they are no worse than the others. At least they are doing something about the pricing which the others did not. And commenters on this site have assured that all this tax goes to NZTA to pay for roads and their management, which many Governments did not do.

Don't disagree.

The governments issue is they are short on income, due to multi nationals and overseas owned companies not paying their fair share of tax. While the solutions are obvious; i.e. a financial/turnover tax, their business interests are protected by politicians who will shut countries down. Look no further than what is happening to Iran and Venezuela for examples of this.

Regulating the banks lending practices and wholesale petrol prices will be a good start, which this government is doing. They have a hard job, as they inherited allot of deferred maintenance. While they are claiming surpluses, its only through creative accounting; otherwise they wouldn't have to borrow more

"While the solutions are obvious; i.e. a financial/turnover tax"

And here's me thinking businesses should pay tax on profit.

You are wrong Good Samaritian (sic) , the oil companies are ALL onshore business and pay tax on NZ Income , where things do get messy is where dividends are paid to the parent without ready cash to do so , and this creates an accounting issue and does reduce tax paid .

How do you propose we pay for roads instead?

Or do you not want new roads and our existing ones maintained?

Or do you want China to pay for them instead?

If the Government were to drop the effective tax on the pump price from 50% to say 25%, would you see a 25% reduction in the pump price?

"This requires all importers to offer a spot price at which they will sell fuel to wholesale customers at storage terminals. "
Surely for a competitive bidding market to evolve they must also create a Spot Market to BUY petrol as well ( a 2-way price)? Anyone can put in an Offer Price at any level they like. But to make it realistic, they must also offer to buy, at some margin below their quoted Selling price. ( determined by the CCC?)

Not holding my breath on cheaper gas prices.

When these big overseas companies own the complete supply chain, they'll just divert their profit to an international arm through an internal cost transaction via a tax haven.

Bring on more electric and hydrogen vehicles, to reduce their private tax arrangements and clean up the planet.

Your not thinking clearly. Hydrogen and Electric will not change the TAX take govt keeps wanting.
Both with suffer RUC and whatever extra TAX govt comes up with.
Just look at 16% tax increase Labour has done while saying NO new taxes.

Just look at 16% tax increase Labour has done while saying NO new taxes.

What they actually promised was no *new* taxes in their first term, except for the Regional Fuel Tax if the Auckland council chose to implement it. Which they did choose. They've ruled out extending that same option to any other councils in the country so long as Jacinda is prime minister.

Increasing existing taxes is not a "new" tax and only trolls try to argue that point.

Had National won the election, they would have also increased petrol excise tax to pay for their Roads of Notional Significance programme, many of which have cost:benefit ratios of less than 1 and the only reason they get built is because National changed the law to allow MPs to direct NZTA as to which roads must be built, aka pork barrel politics.

Dude you might need to take your Labour rose coloured glasses off.
The regional fuel tax was not campaigned on in the last election by my re-collection, all Crown advice was that a regional fuel tax has never worked and puts the price up of the whole country. That was from experience in the past.

The regional fuel tax was not campaigned on in the last election by my re-collection,

So your recollection is faulty, then:
https://www.newshub.co.nz/home/election/2017/08/labour-to-announce-auckl... - this article was ahead of the election
https://www.labour.org.nz/tax - search for "regional fuel tax"

Agree - Labour definitely campaigned on a regional fuel tax.

The regional fuel tax being immediately ruled out for other regions while LGWM gets funded at a higher rate than the CRL and critical Auckland projects languish while business cases are redone and redone and delivery timelines just discarded as more and more people are added through a lack of promised migration reform is nothing less than 'bait and switch' campaigning and only determined Labour apologists would try and argue otherwise.

Very naive to think EVs wont be taxed heavily like our current modes of transport

All roadgoing vehicles should be switched to RUCs and taxed equally based on weight. But heavy vehicles RUC need to go up massively, fourth power law for damage to roads by weight of vehicle IIRC.

and we should look at moving freight off the roads to rail to reduce congestion and damage

Indeed, I look forward to the capex estimates for freight rail into Queenstown, Te Anau, Milford, Tekapo, Haast, the SI Glaciers, Karamea, Nelson, Pakawau and Hanmer. That's just the South Island - tourist hot-spots all. Commenters may care to expand the list for the North Island.....

Yep, for long haul non time critical freight rail is great, but the last mile is still going to be trucks.

Eventually, perhaps. However given the commitment to being carbon neutral by 2050, subsidising electric cars is likely to go on for quite a while as an easy win (together with corresponding investment in renewable energy, assuming the smelter stays open)

Exactly is anyone here old enough to remember how cheap Diesel used to be compared to petrol ? Then everyone started to go to diesel cars and the price shot up. Electric will be no different, suddenly you will find a "Special" electricity price tarif introduced as soon as you try to plug it in anywhere or maybe even a EV road user charge like the diesel RUC per km. One way or another its going to end up costing you the same to run.

So no details about how much this would actually lower petrol prices by? Or how much excises would have to raise to recover the lost GST from not collecting a tax on the taxes already imposed? I for one am shocked.

I would have thought with the PM making statements about how Kiwis are supposedly being 'fleeced' that the report would actually quantify how much by and what they would expect to be paying under an alternative market structure.

Here are those potential price impact estimates;

https://www.stuff.co.nz/business/117929994/petrol-companies-told-by-regu...

Excessive profits for the last 10 years is dead right according to my analysis
How many owner operator petrol stations are there in NZ. If there are any how many are not totally tied up by an agreement with one of the main companies. So I will be interested to see just who is free to exercise free choice in a "competitive" market. More meaningless window dressing?
They need to urgently look at the price of cement in NZ. The lowest priced cement that I can find in NZ is $220/tone plus GST is ex Thailand is an improvement on past costs. The round trip for a bulk freighter must be in the order of 28-32 days so the freight cost alone must form a very large percentage of this cost. Lets say $3 /tone/day making the freight cost in the order of $90/tone. Normal advertised retail prices around Asia appear to be about NZ$64 to $80 per tone FOB. Obviously significantly less for an ongoing wholesale arrangement. So at $220/Tone they seem to be making a very healthy margin.
Golden Bay are our our only manufacturer and their production costs should not be that different than Asia - the same cost for the machinery to mine, transport and process the raw materials. A lot of energy is used but this is and international commodity. Labour is more expensive here, but this is not a labour intensive process so unlikely to be that significant. The geographical and freight cost advantages that Golden Bay enjoy by manufacturing in NZ mean that no body should be able to compete with them by importing such a low value product from Asia. It seems pretty obvious that Golden Bay are Just ripping us off.

To me just another sign that the form of capitalism we're living in is broken - this and the banking sector. How much are the CEO's of our fuel companies getting paid? Is it similar to bank CEO's? Operating as oligoply, maximising profits and paying excessive wages to executive staff while fleecing the average citizen.

At some point this is going to come unstuck.

Replaced by what? centrally planned, government controlled economy like China? or the soviet? Capitalism is very bad, for obvious reasons. To date, the alternatives were even worse though. NZ government is the largest capitalist in NZ.
I am not contending your point that Bank CEOs are paid crazy sums. Under a government controlled bank, you will not have that. But instead of a senior team of 5 being paid $10m each, you will have 60 paid $1m each. Ineffective in substance but on the face value you can say "at least no one is paid $10m".

For decades the US and others have pursued a free-market agenda which has failed spectacularly. The neoliberal experiment – lower taxes on the rich, deregulation of labour and product markets, financialisation, and globalisation – has been a spectacular failure. Growth is lower than it was in the quarter-century after the second world war, and most of it has accrued to the very top of the income scale. After decades of stagnant or even falling incomes for those below them, neoliberalism must be pronounced dead and buried.
https://www.theguardian.com/business/2019/may/30/neoliberalism-must-be-p...

I don't know the answer to this, but how do the Commerce Commission and FMA get funded and how much does it cost for them to operate on an annual basis?

Where I'm getting to is that we pay a hell of a lot to the executive of companies, who then need to be regulated by people who proably also get paid a hell of a lot, because were afraid that they might become corrupt or take excessive profit, but it appears that they already are or already have been - so the question then becomes why bother paying expensive costs for regulation and company executive when they appear incompetent/unable to act ethically/efficiently.

Perhaps instead we should just have completely free and unregulated markets and allow the consumer to decide if they want to give a company their money. If a business decide to take society for a ride and society chose to turn on them, so be it. Both the carrot and stick are then in the hands of society.

Its not Capitalism that is the problem, its how its being applied. Not enough controls to stop anti competitive behaviours and exploitation of resources, labour and environment. And too many controls that are hindering development and protecting the profits of MNCs

So are you saying that we need to pay more taxes to pay for more regulators? Who will pay this tax bill? (once again the consumer...)

No we need our taxes to be spent properly, we need our regulations to create a healthy economy (not based on housing speculation) and for our political system to be free of vested interests

That would go against the rules of human nature - which include greed and exploitation (any history lesson will demonstrate this).

Recently too many have been benefiting from regulations that make them wealthy (in the short term) - so there has been no incentive to change the rules. But that won't last long....unfortunately democracy will only work as well as the society and individual ethics/morals of the citizen that make up that society. If our democratic capitalist system isn't working, we only need to look at ourselves to see why.

It goes back to my original comment. The theory is only effective in achieving the desired outcome if practiced as it were intended, but its currently not.

So do we need to modify human nature?

Not necessarily. We just need to use the tools we create as they were intended instead of for the gain of a few at the expense of the many

So how do you propose we do that?

How much competition do we need in a country the size of NZ.
I can think of at least 6 operators in nz.
Bring too much competition in and what will you see.
Amalgamations and closures.
Deja Vue all over again.

Supermarkets oligopolies next please!

The obvious answer would be to lower the fuel tax or at the very least remove the gst on the fuel tax which is surely double dipping.

The problem Jacinda has is that there is no money. As per Robertson's announcement earlier this week... increasing the crown debt to GDP is a clear sign they have already spent everything and cant afford to hand back any of the tax they are already collecting.

Sure, blame the petrol companies.. but we all know where half the money paid at the pump is going.

... the obvious answer to me is to remove all taxes and excises from petrol except GST ...

But , what is being proposed by this govt is increased compliance and regulation over the industry..... and who will pay for that ? .... the consumer ! ... the very people Taxcinda promises to help are gonna be further disadvantaged ... basically , cos we're being run by a government with no commonsense...

Does the Government really think we are all stupid ?

Which half-witted spin doctor in Wellington came up with this stupid idea to try and take the focus away from the Governments own shortcomings?

Every informed New Zealander knows that a significant % of the Petrol price at the pump is TAX taken by the government .

Cheeky bastards , smoke , mirrors , obfuscation and spin ........

... they think we are their equal ... which is stupid ... cos they are stupider than the general public .... hence Labour's poor political polling ... we are not their equal ... they are the stupidest government in the history of this country... even longer than that ... stupid is as stupid does , Forest ...

So are you saying that if/when elected, National will reduce taxes on fuel? And if they don't, how do they differ from coalition wrt to tax collection? i.e. how do we pay for roading if not via fuel tax.

... user pays ... toll the roads electronically ...

Good plan - where do I vote?

.. run it past Vernon Tava and his Blue-Green Party ... or TOP ... ACT ...

... none of the main parties would touch it ...

Seems like pretty legitimate policy...but untouchable by a main party...makes sense.

The externalities we want to address for cars are roading costs and pollution.

The easiest way to do this is to use RUCs which have rates for both weight and emissions. I.e. heavier vehicles pay more for usage and more polluting vehicles pay more for environmental damage.

An EV would pay nothing for emissions (these should be accounted for at the electricity generator) but still pay for its weight class. This also stops the distortion for hybrids which currently pay much less in tax than an EV would under the current RUC regime.

Glass half full: at least Them as Wot Know Best are leaving diesel alone, apparently. Truck-stop diesel on my latest KiwiFuelCard statement is around $1.239/l and actual truckers will be paying a lot less than That.

Wow , here's me thinking I am the only person who intensely dislikes this Government , it has really cooked the goose with voters

So you think a government that is proposing changes that will bring the price of petrol down by 18c per litre will be unpopular?

After National did almost nothing in 9 years, and they themselves increased the excise 6 times.

Do you know what Simon Bridges did when he was minister of transport? Now, I'm not joking about this, he actually did it. He wrote a letter to the fuel companies asking them to please not raise the price of fuel and to think about hardworking mums and dads if they did put fuel prices up.

That's how effective National are when it comes to this issue.

Playing the 9 year -card ! ............... Is that the only card you have to play ?

How about the 2 year card .............. nothing done at all , every election promise broken

This Government increased the price of petrol AND diesel in Auckland by 9cents a litre in one fell swoop with a new tax.

Now they blame the oil companies for the raging fire they fueled

Sorry but we are not fooled

They've kept more promises than they've broken, so saying "nothing done at all" and "every promise broken" simply shows you're not worth listening to.

Also the regional fuel tax is 11.5c once GST is included and it was imposed by the Auckland council after central government gave them permission to do so. Clearly you don't actually know the facts of what you're trying to talk about.

Now they blame the oil companies

Actually it was the Commerce Commission carrying out a detailed investigation, and they found that the price gouging goes over the last 10 years which National was in power for most of, and asleep at the wheel.

But it's clear you're not actually interested in facts or details, you'd just slag off the government because they aren't your preferred shade of blue.

Did you look at the timeline for the petrol price decrease ? Yes thats right AFTER the election so its just another Labour party bribe, what a joke how stupid do they think we are ? crank up the petrol tax in Auckland and then offer to reduce it post election.

I'm having a great laugh reading all the posts here today. You guys do realise if the government reduces the fuel tax that they will just crank it up somewhere else don't you ? you will be no better off each week, thats the way it works. The government basically has a tax target to hit each year and the money has to come from somewhere. Somehow people here think you can target the rich, well good luck with that the fact is whatever you do and they suddenly have a huge amount to loose they will find a way to avoid it, it pays to avoid it in their case, not yours because a few dollars is not worth your time so you pay it.

I can still remember when they stopped the tv license fee and at the very same time bumped up car rego.
Petrol won't come down at the pump. They're just making some room so they can slot in the carbon tax that we'll be paying to the pine plantations.

How about mandating that 30% of future car imports has to be electric vehicles and slowly phase out the older gas guzzlers. A control on the huge SUVs is also welcome. Proactive out-of-the box steps are needed to lessen dependence on oil and also go green to save the planet.

The government has already proposed policy that does that.

It's the "feebate" scheme that was announced a few months ago that set National into gear making up ridiculous spin about how all petrol powered cars are going to be more expensive now. Electric and low-emission cars will be incentivised, and high-emitting vehicles will be dis-incentivised. There's also a related proposal that requires car importers to change the makeup of the vehicles they import over time.

Petrol tax is punative to inefficient vehicles because it is not a fixed amount per car, it is a fixed amount per litre. Inefficient cars therefore pay more tax.

Compare with RUC, a three ton 20yr old SUV pays the same amount of tax per distance as a brand new 1litre diesel mini.

oh well Gull is coming to Christchurch and NPD are giving the biggies a good go cheap petrol $1.98 today without any discount we where paying $2.36 5 months ago and now averaging $2.07

And I espy a Waitomo station a'buildin' on the SW corner of Fitzgerald and Tuam...and this was kicked off long before the Gubmint decided to Do Somefink....

So, we have a government increasing the cost of fuel via taxes to fight climate change, and at the same time legislating to decrease the price of fuel at the expense of the producers to stop consumers being fleeced.

Quite apart from the schizophrenic nonsense of such a contradictory position, all they will do is increase the tax component of fuel until they force the producers out of the market because it won't be profitable for them, leaving us with no fuel.

The command economy is a frightening thing.

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