Electric cars will drive out petrol taxes

Julian Wood

In a recent column, we made the case for regional petrol taxes, which would allow district and town authorities to resource the infrastructure projects they need.

One issue we did not cover is the long-term viability of petrol tax as a way of paying for the costs associated with road transport. As electric vehicles (EVs) make increasing inroads in the market in the coming decades, petrol taxes will become irrelevant. Their passing is an opportunity for us to tax and fund smarter.

National significance

As it stands, every kilometre you drive in a light passenger car costs you roughly seven cents in petrol excise tax (including GST). That is about $1.80 for the average daily Auckland commute.

While this might sound like a small amount, on average it soon adds up to roughly $800 in excise tax over a year. All this tax goes into a central pot that trickles down to the regions via the National Land Transport Fund, or if your road meets a “national significance” or some form of a marginal electorate political test.

Distribution of revenue

As we anticipate a largely petrol-free future, current taxes could be replaced with a smart toll system that charges a set rate for the roads you travel on, with those tolls returned to the areas you drive through. This would depoliticise the funding and give local communities what they need to pay for roads of not quite national significance, but still really important to the local community.

If you mostly drive in Auckland, Auckland gets your tax to fund its roads. If you mostly drive on state highways, the central government gets your money. When you drive in Thames on holiday, Thames gets the revenue. International tourists travelling the length of the country split their bill with every place they visit. It’s not centralised its smart.

Road Tolls System

The second advantage of a smart road tolls system is that it would also allow for variable pricing. This would enable congestion or peak time charging to smooth overall road use. It also enables discounted travel for people in need or for essential services. If a firm chooses to drive trucks through Auckland at peak hours they might well pay a premium for doing so. Holiday or tourism hotspots with small populations could adjust the price for non-residents, or increase the toll at peak times to ease the burden of providing the infrastructure needed to cope with short-term visitor influxes. Further incentives can be created for people to rethink their use or lack of use of public transport.

Technological change

A non-petrol vehicle future combined with technological change is a huge opportunity to rethink how we gather revenue and fund our transport and infrastructure networks. Smarter options are available than the current centrally controlled, trickle-down model.

New Zealand needs to consider smart road tolls as a way forward to overcome congestion, fund growth and tourism related expenses and return revenue to the regions needing to fund roads and infrastructure of local significance.

Julian Wood is a Researcher at Maxim Institute based in Auckland.

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