Petrol taxes ditched, pay-as-you-drive revolution coming
Wednesday, 6 August 2025
Infrastructure and Transport Minister Chris Bishop has used a big infrastructure speech to lay out a plan for the phase-out of petrol taxes in favour of a new road user charges scheme that scraps the paper labels in cars and modernises the tax scheme in a world of electric and hybrid cars.
Chief among the changes, the Government will be moving to privatise the collection of road user charges in a bid to drive down cost and spur innovation.
“Essentially, the Government will be abolishing petrol tax. People will pay for the roads based on how much they use them,” Bishop said
“And, if we get this right, people will pay based on their vehicle type, the distance travelled, the location, and the time of use,” he said.
Calling it the biggest change in 50 years, Bishop laid out key decisions Cabinet has made. The changes, among a range of funding and financing tools the Government is pursuing to alter how infrastructure and housing is built in New Zealand, are expected to be legislated for next year.
The current RUC system - where users pay for road kilometres and then display them on their windscreen - will be phased out, with the Government getting out of providing this service and letting private e-RUC companies provide the electronic systems.
“Instead of expanding a clunky government system, we will reform the rules to allow the market to deliver innovative, user-friendly services for drivers,” Bishop said.
Under the new scheme there will be no need for drivers to display RUCs on their windscreen as the data will be kept electronically.
Bishop also said that the Government would change the law to allow the RUC charging system to link in with modern car computer systems to help keep track of mileage.
As part of the changes the Government will also essentially be technology agnostic in how e-RUC companies measure and charge - allowing them to compete on these grounds.
NZTA’s roles as regulator and retailer will be split off, while the new collectors of road user charges will also be able to collect other charges such as tolls.
“With road tolling schemes, as well as time-of-use charging, providers of alternative payment schemes should have the ability to provide one bill to cover road users’ costs, such as in a single monthly payment.”
Bishop made the case for the new scheme on efficiency and equity grounds calling the current tax regime “regressive.”
“For years, petrol tax has been a proxy for road usage. But the relationship between petrol consumption and road usage is fast breaking down.”
Bishop said that in 2015 there were 12,000 fuel efficient petrol hybrid vehicles on the road - compared with 350,000 today.
“As our vehicle fleet changes, so too must the way we fund our roads. It isn’t fair to have Kiwis who drive less and who can’t afford a fuel-efficient car are paying more than people who can afford one and drive more often,“ Bishop said
“Lower income Kiwis don’t necessarily have the option to buy a new, efficient hybrid vehicle. Wealthier folk like me who can afford newer, more efficient cars pay relatively less.”
Bishop said the changes were built on an official request for information in 2024 that saw 25 potential retailers express interest in participating in the new scheme.
“But this is just the beginning. The full transition of the light vehicle fleet will come later – once the market is ready. I am not going to put a date on that today, intentionally – we are choosing to get this right, not to do it fast,“ he said.