Transport Minister reveals the impact of new fuel taxes, critics dismiss his figures

Thursday, 28 June 2018

Transport Minister Phil Twyford says looming fuel taxes have been 'carefully designed' to minimise the impact on families, but opponents say they hit the poor four times harder than the rich.

On Thursday Twyford's office revealed Transport Ministry figures on the estimated impact of a series of excise tax increases over the next three years, as well as the Auckland regional fuel tax.

On October 1, excise tax on petrol will increase by 3.5 cents a litre nationwide (just over 4c including GST), while on Sunday, petrol companies will pay another 11.5c in tax for every litre of petrol sold in Auckland.

According to the figures, by 2020, the impact on the average household outside Auckland will be $2.50 a week, while in Auckland the impact will be $5.77 a week.

READ MORE: Transport Minister says no guarantee that cost of Auckland fuel tax won't spread

The analysis appears to be based on the Government's assumption that the impact of the Auckland regional fuel tax will not spread across the rest of New Zealand, something both the Ministry of Transport, the AA and others have warned is a major risk.

The figures provided by the Government claim that poorer households will pay less, with 'decile one' households in Auckland, those on the lowest 10 per cent of incomes, paying $3.64 a week extra, ranging up to the top 10 per cent of incomes paying $7.71. Outside Auckland, the poorest households will pay an additional $1.29 a week, rising up to $4.29 a week in the richest households.

'This move has been carefully designed to minimise the impact on families while unlocking the investment we urgently need,' Twyford said in a statement.

The make up of the latest round of excise tax increases does not appear to have been designed differently to previous hikes. Twyford's office later clarified that the statement referred to the fact that the increases were being spread over three years.

Critics say fuel taxes are regressive, as they eat into the household budgets of poorer families more than wealthier ones.

Twyford himself has acknowledged the tax is regressive, meaning it has a disproportionate impact on poorer households.

'We have never denied that the regional fuel tax is a regressive tax—it is,' Twyford said in Parliament.

Sam Warburton, an economist at the New Zealand Initiative dismissed the figures, saying the figures took no account of the fact that many poorer people, especially younger people and students, drove very little, but the figures were presented in a way which averaged the impact across everyone.

The claim that the tax minimised the impact on families was 'just wrong', Warburton said.

Based on the average Auckland driver travelling slightly less than 10,000 kilometres a year, Warburton said someone driving one of the 10 per cent of the most fuel efficient cars available, the tax would add around $140 a year in costs. In one of the least efficient cars, the added cost was likely to be around $270 a year.

Warburton said poorer people tended to own older cars, while also tended to have larger families, meaning their cars were on average larger. This meant those households used considerably more fuel on each journey than wealthier families.

'The minister may not realise how misleading the data is,' Warburton said.

Thomas Lumley, Professor of Biostatistics at the University of Auckland, said while wealthier households tended to spend more on fuel than poorer ones, they also tended to spend more on food and other items, but not as a share of income.

'Any user charge is going to be a lower proportion of income for wealthy than poor households. The regional fuel tax is no exception,' Lumley wrote on Thursday.

'This means that people on lower incomes are more reliant on fuel because they need to drive further and consume more fuel when they drive.'

National transport spokesman Jami-Lee Ross said the tax would certainly have a greater impact on poorer households.

'Let's be clear – this is a regressive tax and any claims otherwise fail to acknowledge the fact that low income households pay a much higher percentage of their total income on fuel than higher income households,' Ross said.

'This occurs for a number of reasons. Those who are on a lower income are more likely to live further away from main centres and they are also less likely to have newer and more fuel efficient cars.'

The Taxpayers' Union said even using Twyford's figures the tax was clearly regressive, with the impact in Auckland representing almost 0.8 per cent of weekly income for the poorest 10 per cent of householders and around 0.2 per cent for the highest income 10 per cent.

'Fuel taxes whack the poorest almost four times as hard as they whack the richest,' the Taxpayers' Union said.

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