Cost of higher fuel tax

July 2, 2019

An extra four cent tax was imposed on motorists yesterday.

The direct cost is obvious – it will be more expensive to buy fuel.

The indirect costs won’t take long to take effect – higher prices for everything that has a transport component.

That will hit individuals, community organisations and businesses.

And for what?

. . .Half-way into the “year of delivery,” and all we’re seeing is key projects delayed, down-sized or discarded. The public are seeing noticeable asset deterioration at a rate we haven’t seen previously. It’s across New Zealand, Forum members advise, not just Auckland. . . 

Where’s the money gone? What exactly has it been spent on? Auckland transport users certainly aren’t seeing the benefits.

The rest of New Zealand isn’t seeing any benefits either.

We’re paying higher prices for fuel and getting less spent on roads.


Petrol pain pressures policy on hoof

October 25, 2018

The pressure from the pain of petrol prices has forced a government backdown:

National Party Leader Simon Bridges has welcomed the Prime Minister’s forced backdown on her regional fuel taxes, and called on her to overturn her excise increases and remove the regional fuel tax imposed on Aucklanders.

“After pressure from the National Party over her Government’s decision to impose more and more new taxes on record petrol prices the Prime Minister has today finally backed down and ruled out rolling the regional fuel tax out beyond Auckland while she is Prime Minister.

“This is in spite of her Government introducing legislation which would have enabled the 11.5 cent per litre regional fuel tax to be rolled out around the country from 2021. It has already been imposed on Aucklanders.

“Fourteen other councils had already started discussions with the Government saying they wanted the tax and will be surprised to hear about the Prime Minister’s backdown today.

“Her Transport Minister was also be surprised at his Prime Minister’s unilateral decision. This was forced policy made up on the hoof by a Prime Minister under pressure over her disregard for the costs her Government is imposing on New Zealanders.

Policy on the hoof is becoming a habit. This time it’s doing the right thing but it’s not a good way to govern.

“New Zealanders will be relieved. These taxes on top of record petrol prices are hitting them hard and pricing them out of their cars yet this Government was blindly forging ahead with new taxes because it can’t get its spending under control.

“The Prime Minister needs to go further, do the right thing and throw her numerous new taxes out completely. She should remove the regional fuel tax from Auckland as well as her first four cent national excise tax increase, and pledge not to impose any more new taxes.”

 She can cast blame on fuel companies but nearly half the cost of a litre of petrol is tax.

It was bad enough when all the money collected was spent on roads, it’s much worse now some is being spent on cycleways and public transport most of us will never use.


Who’s fleecing us?

October 10, 2018

Jacinda Ardern reckons fuel companies are fleecing us.

The Motor Trade Association says that isn’t so:

. . . MTA Chief Executive Craig Pomare says the biggest influences on prices at the pump are the landed refined price of petrol and diesel, taxes and the value of the NZ dollar against the USA dollar.

“Competition also has a big effect in New Zealand. It is well recognised that the deregulation of the market and the emergence of Gull, and other smaller independents such as Challenge and G.A.S. have affected prices in the areas where they operate. So too has the widespread use of discounting.”

Mr Pomare says the independent fuel retailers have minimal control over their daily pump prices.

“Most of these small businesses have contracts with the oil companies which give them very little wriggle room when it comes to setting their pump price.

“We take issue with the Prime Minister for suggesting that service stations, or oil companies are ‘fleecing’ motorists. Last year’s review of pricing by MBIE found no evidence of this. Like others in the sector, and the public, we support a further detailed market study to give us all more information on pricing structures.”

He says if the Government is seriously concerned, there is plenty of precedent for reviewing fuel taxes and either lowering them, or holding off on further increases.

Michael Barnett, chair of the Auckland Business Chamber has no doubt where the blame lies:

The tipping point for fuel consumers has been the blunt and ineffective fuel taxes imposed by local and central government. The margins identified by media today are less than most retailers would seek and have not changed.

It is worth noting:

• The major fuel companies welcome the proposed investigation from the Commerce Commission

• Of the 1,500 service stations in New Zealand, over 1200 are mum and dad running their small businesses, employing people and trying to make a profit. They deserve a return on the risk

• There are 20% more fuel providers than 5 years ago – does this signal a lack of competition?

The currency and additional Government taxes have created a price point consumers find unacceptable.

Consumers don’t only find the price unacceptable, Many also find it unaffordable.

The National Party has called for the tax increases to be dropped.

The Government should axe its fuel tax increases to provide immediate relief to motorists, Opposition Leader Simon Bridges says.

“Instead, the Prime Minister’s response to record high fuel prices is to announce yet another inquiry.

“She’s saying consumers are being ‘fleeced’ while her Government is driving up fuel prices and taking hundreds of dollars from Kiwi households through higher taxes on fuel.

“The inquiry will take months and any resulting changes could be years away. Meanwhile New Zealanders are paying record prices for petrol and the Government is collecting hundreds of millions of extra tax from them.

“Unlike petrol, talk is cheap. And the Government is a big part of the reason why petrol prices are so high.

“The importer margin, the profit petrol companies make on every litre of fuel sold and which the Prime Minister wants more information on, is 31 cents per litre and around the same as it was last year. The amount the Government makes is $1.25 – and that keeps increasing.

“The average New Zealand household is now paying $200 a year more in petrol taxes than this time last year, with Auckland families paying $324 extra as a result of higher petrol prices and this Government’s decision to hike fuel taxes. It’s pricing Kiwis out of their cars.

“There are a number of other reasons behind record petrol prices and National supports another look at the practices of fuel companies, something we also looked at in Government, but the Government should also be looking in the mirror.

“While the Government passes new legislation and waits for yet another report it should provide immediate relief to motorists by putting a stop to its relentless imposition of new taxes.”

The Taxpayers’ Union agrees:

Taxpayers’ Union Economicts Joe Ascroft says “When the Government was legislating for fuel tax hikes, we argued that these taxes punish hard-working families – especially those that live in the city-fringe and are forced to commute for work. The Government should back the call from the Opposition and provide much-needed relief to family motorists who are struggling.”

“Now that National has called for fuel tax repeal, it must meet that commitment if it goes back into Government in 2020, 2023, or later. It’s easy to argue for tax cuts in opposition, but walking-the-talk in Government is much harder. The Taxpayers’ Union will be watching closely
.”

Who is fleecing us?

The government that is taking nearly half the price of fuel in tax and worsening the pain by spending the increases not on roads but public transport and cycle ways most of us will never use.


$2.63 and rising

October 8, 2018

Is this the most expensive petrol in the country?

Regular petrol in Wanaka yesterday cost $2.639, premium was more than $3 and diesel was $1.999.

The lower value of the New Zealand dollar is contributing to the rising price, but so too is the government’s new fuel tax.

It’s supposed to be levied only in Auckland but it’s appears to be spreading throughout the country.

And whether or not the tax is spreading north and south of Auckland, the pain of higher fuel prices is being felt nationwide.

All goods and services have a transport component, when the price of fuel increases, it put pressures on every single thing that is transported.

And the virtue signalling about the environment is cold comfort for those of us who will rarely if ever use Auckland’s public transport and have no public transport available locally.

This will be a tax too far for many people.

A government that talks about caring about child poverty needs to act to reduce the costs their parents can’t avoid.

 


Paying more getting less

September 7, 2018

Petrol in Palmerston North on Tuesday cost $2.11 a litre.

In Kurow on Wednesday it was $2.30.

That’s hard to stomach when the four-lane highway that was planned for the very busy Christchurch to Ashburton section of State Highway 1 has been canned.

A little bit of the extra we’re paying is a result of higher prices for crude oil and the lower New Zealand dollar.

A lot of it is tax.

We’re paying more and getting less.

 


Poor pay less and more

June 29, 2018

Transport Minister Phil Twyford says the poor will pay less fuel tax than wealthier people.

He’s right in dollar terms but if he’s worried about the impact that’s not what matters, it’s the proportion of income that counts:

“Transport Minister Phil Twyford is either very brave or very stupid in arguing that fuel taxes are easiest on the poor,” says Taxpayers’ Union spokesman Louis Houlbrooke.
 
“He is doggedly focusing on the dollar impact of the fuel tax, and ignoring the cost as a proportion of total income.”
 
“It’s no surprise that rich people buy more fuel – they buy more of everything. But people on low incomes spend a far larger proportion of their income on fuel, meaning a tax hike will have a far bigger effect on their real quality of life.”
 
“It only takes five minutes to graph Twyford’s figures and see the real impact of fuel tax.”

“The verdict is clear: fuel taxes whack the poorest almost four times as hard as they whack the richest.”
 
“It’s stunning to see such selective ignorance from a centre-left Minister who is meant to understand issues of fairness and equality. Isn’t this stuff Labour Party 101?”

As David Farrar points out, the poor consume less of almost everything (except tobacco) but spend a higher proportion of their income on it

The cost of the fuel tax will be greater for higher income people but the poor will pay more of what they earn on it:

Now let’s look at the average incomes for each decile

  • Decile 1 – under $23,900
  • Decile 5 – $64,400 to $80,199
  • Decile 10 – over $188,900

So the extra fuel tax as a percentage of income is:

  • Decile 1: 0.52%
  • Decile 5: 0.27%
  • Decile 10: 0.14%

Let’s not forget it’s not just the direct cost that will hit the poorest hardest.

Every service and all goods with a transport component (and can you think of anything that doesn’t have one?) will be impacted by the tax and that will, sooner or later, lead to price increases, inflationary pressure and interest rate rises.

The Ardern/Peters/Shaw/Davidson coalition government, all parties in which purport to represent and work for the poor, is adding to the cost of living and making life harder for them.

And adding to that is yesterday’s announcement we’ll all be paying an extra 10.5 cents a litre over the next two years in excise tax.

P.S.

Michael Redell writes on regressivity, petrol taxes, and ministerial PR at Croaking Cassandra.

Thomas Lumley examines the issue at Stats Chat.

Sam Warburton tweets on it here.

 


Trust & confidence needed for investment

June 28, 2018

Who’s surprised?

New Zealand business confidence plunged to a seven-month low in June with retail most gloomy as costs, credit and capacity weigh on firms.

A net 39 per cent of 341 firms surveyed in the ANZ business outlook survey expect general business conditions to deteriorate in the coming 12 months, 12 points lower than May’s result and the lowest that measure has been since November 2017.

The survey has become a political football since the election as headline confidence has continued to weaken, with Finance Minister Grant Robertson saying he thinks it’s an issue around perception and the survey is not historically correlated with GDP growth.

Companies are also typically more downbeat about the broader economy under a Labour administration, and ANZ stressed today that business sentiment “is only one input into the decision-making that drives the economy” and “firms’ expectations of their own activity are a better gauge of future GDP growth.”

That measure was today down but remained positive, with a net 9 per cent of firms predicting increased activity in their own business, from net 14 per cent last month. . .

Businesses need trust and confidence to invest and grow, this government has shown little to foster either.

The captains’ call to halt future oil and gas exploration without consultation or warning; the fuel tax;  the prospect of employment legislation which will strengthen unions at the expense of employers and employees; an increase in strikes; the prospect of higher inflation and interest rates . . .

All this and more are disincentives to the investment which is needed for the business growth which secures and increases employment and economic prosperity.

 


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