Monday, 18 May 2015

A tweak for road user charges

New Zealand's road user charge system, in which petrol excise is a level rate but diesel charges vary with the weight of the vehicle, seems likely due for a rethink in the next few years. The bigger change will be needed as electric and hybrid cars take up a greater proportion of the fleet.

But here's a little one that could be bundled in at the same time.

Currently, every diesel owner has to report mileage and pay their road user charges. Smaller vehicles have a low per-km charge; large ones have a larger charge. It would be trivially easy to impose excise on diesel equivalent to the costs that small diesel vehicles impose on roads - the same as the petrol levy. Then, exempt small diesel vehicles from having to pay road user charges while lowering the tariffs for larger vehicles' road user charges.

You'd maintain the appropriate link between vehicle weight and road user charges while saving a pile of smaller diesel vehicle owners the hassles involved with road user charges. And as more smaller vehicles switch over to diesel, it seems a simple change worth making.

Update: the comments section has helpfully pointed out the substantial issue with this scheme:

  1. Because much diesel is used off road, we'd have a trade-off between the hassles of RUC for small diesel vehicles and the hassles of running an untaxed stream of diesel that could leak back into the road market. When I was a kid in Canada, petrol for on-farm use had purple dye in it, and vehicles that were not registered for farm use were forbidden from using it; they had occasional checks, and a purple tinge in your carborator could be used against you.
  2. The actual hassles of paying RUC for small diesel vehicles is smaller than I had been led to believe by the diesel owner who pointed me in this direction. So it seems highly unlikely that the overall scheme is hassle reducing.
I consequently withdraw the suggestion.


  1. I understood that one of the reasons for the excise being collected differently on diesel was that a significant amount of it was used by non road going vehicles, heating, industry etc and that charging the road users was a more efficient process than having non road users claim rebates.

  2. It's probably something that is in its sunset days in terms of a meaningful hassle. GPS deployed by companies like NZX listed EROAD have essentially solved this for commercial operators, and presumably smaller vehicles will get a similar solution in the near future.
    Still more hassle than taxing at the pump, but not by miles. Also has the potential to sort electric vehicle free riding.

  3. You'd maintain the existing link between vehicle weight and road user charges. Given that road user charges are structured to deliver enormous subsidies to heavy vehicles, whether this is appropriate is a separate question.

  4. I have absolutely zero knowledge of whether the current RUC-by-weight scheme has the appropriate gradient. I'd expected it did, but I've never looked at it. Specify that I prefer that RUCs have the appropriate gradient that charges trucks by the marginal cost they impose on roads.

  5. I have a diesel car. Paying the RUC is trivial. Whenever you find your mileage has gone near the current limit, you go on the NZTA website, put in your rego, and the site offers you the next 5,000 km based on what it remembers as being the limit you bought to last time. Pay by remembered credit card, it gets posted to your remembered address. 2 minutes and you're done.

  6. I'd guess the politics at stake here as well, slugging a smallish portion of the electorate is much easier than slugging virtually all of it. Turns out that people who drive also vote

  7. So it's then part of the process you'd be going through anyway when re-upping your rego?

  8. Pretty much. Except that it operates as pre-pay, so that you need to top up whenever you use up your current lot of kilometres. Making it backward looking, to be paid once a year on re-doing rego (or on transfer of title), would make the system a bit more seamless, without changing anything serious.

  9. I saw figures a while ago, and from memory, about half of diesel is used off the public roads*. It seems like it's much simpler for cars to go through RUC than to have to run that sort of exemption system. There's an exemption system for petrol (only a tiny fraction of which is used off-road) and it's a diabolical nightmare unless you're using vast quantities. Whereas RUC is no more complicated than car registration itself.

    (* that includes rail and maritime use)