Julian Wood

By Julian Wood - 14/08/2017

Julian Wood

By Julian Wood -

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Paying at the pump to revive our crumbling infrastructure

We hear a lot about Auckland’s infrastructure woes, but across the country there are regions desperately trying to fund their infrastructure needs. Small councils cannot keep increasing rates on sometimes fewer residents to fund toilets, road upgrades or rubbish collection for tourists. We’ve already argued that New Zealand should charge tourists for the privilege of enjoying our natural assets, it’s time we turned our attention to a second piece of the puzzle. A regional petrol tax.

At the moment, every litre you put into your tank gives 59.524 cents to the National Land Transport Fund, a big pot of money that’s doled out by central government to what it wants to prioritise. That needs to change. It’s time local authorities had a bigger say in how the tax extracted from the regions is spent on local infrastructure.

A blanket regional petrol tax would allow local authorities to opt into a scheme that adds perhaps 5 cents a litre to the pump price across the country, or reallocates 5 cents of the current tax to be returned directly to the region in which it was taken.

By tying the proceeds to local infrastructure needs it would provide funding for projects that are perhaps not of “national significance” but very important to people in that area.

Regional petrol taxes have been rejected many times by central government. The last time was earlier this year when the Minister of Transport outlined that they are “administratively difficult, prone to leakage and cost-spreading, and blur the accountabilities between central and local government.” In fact, it doesn’t have to be like that at all.

Let’s take these claims in turn. It seems to me that modern technology can increasingly overcome the administrative difficulties. Petrol companies would already have a breakdown of all aspects of their business by each location station; things like wages, amount of milk sold, and the amount of petrol delivered to each petrol station. It’s a small step from there to aggregate these by region, all it needs is a geographic code to be added to a database. This is hardly earth shattering.

As for leakage and cost-spreading, these are issues that only occur when the regional tax rate stops at a certain border. Far from being a problem, this issue evaporates if all the regions opt in at the same tax rate.   Given the widespread need for investment in regional infrastructure, I don’t foresee many regions opting out if a nationwide plan is put on offer, which means there will be no “tax-borders” that consumers can drive across to get cheaper, untaxed petrol.

The final claim around “blurring the lines of accountability” seem to be the most important to understand. In reality it means that the central government wants to maintain its hold on revenue and therefore infrastructure decisions. If regions have the right to a regional tax it’s a good step towards greater self-determination and responsibility for leaders in regional New Zealand.

It’s time to rethink this balance of power, and time for local government to have the resources to have a bigger say in the infrastructure decisions that will shape the future of their region.

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Julian Wood

By Julian Wood -

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