Fuel Tax Better Than Road User Charges?

Petrol is more expensive than diesel because the former has a fuel tax levied on it and the latter doesn’t. But diesel powered vehicles pay Road User Charges instead.

The chair of the Road Transport Forum, Steve Doughty told Mary Wilson on Checkpoint last night that he’d be keen on an investigation to determine if fuel tax might be better than RUCs.

My initial reaction to this is positive. RUCs are based on distance, the further you go the more you pay. That sounds fair enough until you work out that vehicles which travel further efficiently pay more than those which travel a shorter distance inefficiently.

Fuel taxes, are consumption taxes so the more you use the more you pay and there is a financial incentive to use it efficiently.

Doughty reckons that the administration on RUCs costs around $100 million a year. That sounds high but there must be a lot of paper work involved with all the vehicles each with individual RUCs which need to be purchased and processed.  It would be simpler and cheaper to pay fuel tax at the pump as we do for petrol.

Changing from RUCs to fuel tax might be more expensive for people with diesel powered cars who drive short distances. But it would definitely be easier and, by reducing the adminsitration,  possibly cheaper for every vehicle covering long distances.

It would also relieve traffic police of the task of checking RUCs are up to date and writing tickets if they’re not 🙂

5 Responses to Fuel Tax Better Than Road User Charges?

  1. poneke says:

    Every call for every change is done from the self-interest of the person calling for it.

    Thus you can be certain that the proposers of this switch want it, because they would pay less money, while putting the lost revenue onto other users. In this case I suspect it would cost heavy trucks, which do the most damage to roads, much less than now while increasing the costs for lighter trucks, buses and diesel-powered private cars.

    I am not raising this out of any self-interest of my own. I have a small petrol car, and go to work by trolley bus, so the cost of diesel and RUC does not affect me.

    But as I say, self-interest of the proposer will be behind this, and behind any call for change.

  2. homepaddock says:

    Poneke – every lobby group will be motivated at least in part by self-interest.

    If you’re right that larger trucks would pay less than their fair share of roading costs if they’re subject to a fuel tax rather than RUCs, I wonder if there is another system with less administration?

    RUCS may not affact you directly. But almost everything we buy has been transported. If RUCs go up transport companies will absorb some of the increase but some will be passed on to consumers; that will fuel inflation and that in turn will keep interest rates up.

  3. bobux says:

    If I’m not mistaken, the RUC regime came in in the late 1980s, prior to which fuel tax was paid on diesel. Various sectors (shipping, farming and construction come to mind) strongly lobbied the government for change, on the grounds that the diesel they burnt wasn’t used on the roads.

    The logic is pretty hard to argue with – why should a cockie plowing his back paddock, or someone running a stationary generator, pay road tax? So the road tax went. But to ensure that diesel-burners still contributed to the roading system, the RUC was introduced on all diesel vehicles.

    That is my recollection of where the RUC regime came from – I am happy to be corrected by someone better-informed.

  4. homepaddock says:

    I’m not sure about the timing but I think you’re right about the reason.

    I also think in other countries which tax diesel for road use but not farms, the diesel for farm vehicles is a differenct colour so vehicles on the road can have their fuel checked to ensure they’re not using non-taxed fuel on the roads.

  5. dingZegejed says:

    Tahnks for posting

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