Proposed Road User Charges Welcomed

By Trevor Thornton, Partner and National Head of Transport & Logistics, Grant Thornton New Zealand

Road User Charge (RUC) evasion, which is conservatively estimated by officials at $30 million a year, should be severely curtailed with the introduction of the new Road User Charges Bill and Regulations.

Replacing the old Road User Charges Act 1977 and the Road User Charges Regulations 1978, the new bill will be welcomed by many because they are modern, fairer and simpler and will make administering and complying with the system more cost effective and efficient.

Some estimates put the total loss of the present system (evasion plus the deadweight cost of compliance, administration plus enforcement for officials) at $100 million.

There are approximately 580,000 RUC paying vehicles in New Zealand and this new legislation will address the three major concerns that sparked the nationwide truck protest in July 2008, that of adequate notice for any RUC increases; simplification of the system and a review of the Cost Allocation Model

RUC is a tax that is paid by all vehicles over 3.5 tonnes and all diesel vehicles for use on the road. Petrol vehicles pay for their road use through fuel excise duty. There is no such duty on diesel. The revenue earned goes into the National Land Transport Fund, which pays for road construction and maintenance and other associated activities.

The alarming level of RUC evasion under the old regulations, and the fact that the trucking industry is a major contributor to roading costs, meant that the honest were subsidising the dishonest.

So what are the proposed changes to the RUC legislation?

There is a change to the definition of licence weight from actual gross weight to a definition based on maximum permissible on-road weight.

A reform of the time-licence system and modernisation of the list of exempted vehicles will mean the time licence system will be discontinued and some selected vehicle types will instead pay a flat annual charge.

There will be improvements in the regulatory framework for electronic management systems, which will rationalise the approval process for electronic service providers while also authorising the monitoring of these providers.

There will also be improvements in RUC compliance with the introduction of more stringent regulations around odometer tampering, transport service operators being required to keep RUC records and the government having assessment powers similar to those available in relation to other forms of taxation.

It will also bring greater simplification. By changing the definition of licence weight, removing time licences and simplifying the list of exempted vehicles, compliance costs will be reduced and the administration processes for industry and government will also be simplified.

The plan is to have enabling legislation in the House this year and passed early next year with the new regime coming into effect in 2012.

ENDS

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