Don't scrap tax increase, say contractors

MEDIA RELEASE

1 December, 2004

Don't scrap tax increase, say contractors

News that the proposed increase in fuel excise tax of 5 cents per litre, due to come into effect on 1 April 2005, might be delayed has drawn strong criticism from the industry body representing roading contractors.

Roading New Zealand chief executive Chris Olsen says the contracting industry has been gearing up to meet the additional $5 billion of transport projects due to come on stream in the next ten years, and that delaying the tax increase could create uncertainties in funding.

"We've received assurances of funding and work programmes from both Transit and Transfund, as well as support from government for additional employment and training initiatives", says Mr. Olsen.

"The roading industry has invested heavily and has already taken on 450 additional employees in the past six months or so. Our industry is ready to deliver, but now there's talk of an Order in Council to postpone some of the funding", he said.

"If the fuel tax increase is deferred", he added, "it will create immediate funding uncertainty and a loss of momentum for contractors gearing up for the additional projects".

Mr. Olsen believes that unless the government plans to provide the necessary funding by some other means, some of the major construction works currently planned under the New Zealand Transport Strategy will not proceed, in spite of contractors having invested in the resources to do so.

The planned 5 cent increase was announced by government in December 2003 as part of a package to provide an estimated $297 million per annum for new transport initiatives, particularly for Auckland.

Mr. Olsen points out that both the Ministry of Economic Development, in its Auckland Transport Buildability Report, and the report of the Auckland Joint Officials Group (JOG), had concluded funding certainty was critical to ensure contractors were fully resourced to cope with the forward work programme.

Industry estimates are that around $2 billion will need to be spent on additional plant and some 2,000 extra workers would be required to cater for planned projects.

Roading New Zealand represents contractors who build and maintain New Zealand's land transport infrastructure. Its members carry out 90 percent of Transit New Zealand work and 70 percent of local authority roading work, and have a combined turnover of $1.4 billion per annum.

ENDS

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