Fuel tax and the cost of doing business
Auckland’s regional fuel tax is all set to start in mid-July after councillors voted 13-7 in favour of the proposal on Thursday, May 30.
The tax, of 11.5 cents per litre, will be added to petrol and diesel sold within the Auckland region.
So what happens next and how will it affect the cost of doing business?
I had a quick read of the definition of ‘fuel’ from the definition section of the Local Government Act 1974, now before Parliament. The amendments to the Act will then introduce the fuel tax. It’s not only fuel that will be taxed, as in petrol, but also diesel (including blends of diesel and kerosene), biodiesel and ethyl alcohol. It also says there are exemptions, where the tax excludes engine fuel supplied for use in the generation of electricity, or the manufacture of gas, for public use at any electric-power station or gas works; or engine fuel provided for use as fuel for any commercial ship or engine fuel used in the manufacture of refined petroleum products at any refinery.
Whether you call it an excise tax or direct tax, it doesn’t matter – as the public will have to pay. It is still a tax, monies that you must pay to the government coffers.
Recently, on April 1, the minimum wage increased from $15.75 an hour to $16.50 - an additional 75 cents an hour. The government has also promised to increase the wage to $20.20 by April 2021. This no doubt will be an extra cost to do business.
What do you think is going to happen? You don’t have to be a rocket scientist to realise that the cost of doing business is going to rise, which will have a material impact on goods and services. And who do you think will be affected the most? Yes, whoever lives and calls New Zealand their home.
The current excise rate on petrol is 59.524 cents per litre. The current cost for a road user charges a license for light diesel vehicles (weighing 3.5 tonnes or less) is $62 per 1,000 kilometres. Electric vehicles would be subject to road user charges, but the government has agreed they will remain exempt until at least June 30, 2020.
A diesel increase will have an impact on transportation business. They will,
in most cases pass on the increase to the end user. At the end of the chain are kiwis adjusting to increases in prices with no real add-on value. I understand from friends in the transport industry, business is already very competitive with low margins.
Motorists will pay between 10.35c and 13.8c a litre when GST is added to the tax over the next 3 years in phases. The Government tax is on top of a regional fuel tax of 11.5c a litre, including GST, planned by Auckland Council. The combined regional and Government fuel tax means Auckland motorists will pay between 21.85c and 25.3c a litre for petrol after three years. That is a massive increase not only to ordinary folks going about their daily lives but also to the business community in general.
From small transportation business to Uber drivers to people working in sales and marketing, who largely use petrol, will no doubt find the increase, painful.
The cost of which in most cases will be passed to the end consumer.
Tax increase seems to be the only idea that the Labour and National Governments generally have been looking at to increase crown revenue.
In fact, all things being equal, that should be the last resort.
The focus should be on creating a healthy and competitive business environment. Policymakers need to look at creating a conducive investment climate, free trade zones and the like, export incentives and pioneer status tax exemptions which in turn will make the economy robust. This will create more commercial activity meaning more revenue in direct and indirect taxes.
What we do here instead with both governments is, have tax working groups whose only idea is to come up with all kinds of taxes that affect the public.
Not a very smart idea.
Dave Ananth is an Auckland-based Tax Barrister. The views expressed above are his own.
Auckland’s regional fuel tax is all set to start in mid-July after councillors voted 13-7 in favour of the proposal on Thursday, May 30.
The tax, of 11.5 cents per litre, will be added to petrol and diesel sold within the Auckland region.
So what happens next and how will it affect the cost of...
Auckland’s regional fuel tax is all set to start in mid-July after councillors voted 13-7 in favour of the proposal on Thursday, May 30.
The tax, of 11.5 cents per litre, will be added to petrol and diesel sold within the Auckland region.
So what happens next and how will it affect the cost of doing business?
I had a quick read of the definition of ‘fuel’ from the definition section of the Local Government Act 1974, now before Parliament. The amendments to the Act will then introduce the fuel tax. It’s not only fuel that will be taxed, as in petrol, but also diesel (including blends of diesel and kerosene), biodiesel and ethyl alcohol. It also says there are exemptions, where the tax excludes engine fuel supplied for use in the generation of electricity, or the manufacture of gas, for public use at any electric-power station or gas works; or engine fuel provided for use as fuel for any commercial ship or engine fuel used in the manufacture of refined petroleum products at any refinery.
Whether you call it an excise tax or direct tax, it doesn’t matter – as the public will have to pay. It is still a tax, monies that you must pay to the government coffers.
Recently, on April 1, the minimum wage increased from $15.75 an hour to $16.50 - an additional 75 cents an hour. The government has also promised to increase the wage to $20.20 by April 2021. This no doubt will be an extra cost to do business.
What do you think is going to happen? You don’t have to be a rocket scientist to realise that the cost of doing business is going to rise, which will have a material impact on goods and services. And who do you think will be affected the most? Yes, whoever lives and calls New Zealand their home.
The current excise rate on petrol is 59.524 cents per litre. The current cost for a road user charges a license for light diesel vehicles (weighing 3.5 tonnes or less) is $62 per 1,000 kilometres. Electric vehicles would be subject to road user charges, but the government has agreed they will remain exempt until at least June 30, 2020.
A diesel increase will have an impact on transportation business. They will,
in most cases pass on the increase to the end user. At the end of the chain are kiwis adjusting to increases in prices with no real add-on value. I understand from friends in the transport industry, business is already very competitive with low margins.
Motorists will pay between 10.35c and 13.8c a litre when GST is added to the tax over the next 3 years in phases. The Government tax is on top of a regional fuel tax of 11.5c a litre, including GST, planned by Auckland Council. The combined regional and Government fuel tax means Auckland motorists will pay between 21.85c and 25.3c a litre for petrol after three years. That is a massive increase not only to ordinary folks going about their daily lives but also to the business community in general.
From small transportation business to Uber drivers to people working in sales and marketing, who largely use petrol, will no doubt find the increase, painful.
The cost of which in most cases will be passed to the end consumer.
Tax increase seems to be the only idea that the Labour and National Governments generally have been looking at to increase crown revenue.
In fact, all things being equal, that should be the last resort.
The focus should be on creating a healthy and competitive business environment. Policymakers need to look at creating a conducive investment climate, free trade zones and the like, export incentives and pioneer status tax exemptions which in turn will make the economy robust. This will create more commercial activity meaning more revenue in direct and indirect taxes.
What we do here instead with both governments is, have tax working groups whose only idea is to come up with all kinds of taxes that affect the public.
Not a very smart idea.
Dave Ananth is an Auckland-based Tax Barrister. The views expressed above are his own.
Leave a Comment