Election 2023: National to phase out fuel excise tax and make EVs subject to road user charges

Road user charges will soon apply to all vehicles, including electric vehicles, according to a new plan by the National Party if they win the next election.

The party’s transport spokesperson Simeon Brown said as New Zealand moves towards electric vehicles, there needs to be a way to maintain the sustainability of the National Land Transport Fund.

“It will be a much fairer way of charging for the number of kilometres people drive rather than the amount of fuel they use,” he told the Herald this afternoon.

Drivers of any vehicle that is not taxed at the source such as diesel or electric must pay road user charges rather than a fuel excise tax that is charged directly at the pump.

There are currently about 63,000 registered electric cars on NZ’s roads – slightly more than 1 per cent of our total vehicle fleet. As at mid-year, around half of new car sales were vehicles with some form of electrification.

The money raised from these charges is invested into the National Land Transport Programme which pays for the upkeep of the New Zealand roading system.

Currently, electric vehicles are exempt from road user charges until the end of March next year, but National will not extend that exemption once it expires.

The vehicles have been exempt to encourage people to buy them, but this started to eat into the revenue raised for fixing roads.

As things stand, that would see EV owners begin to be charged $76 per 1000km, to add to the $2 billion in RUC raised from other motorists, mostly truckers and diesel car owners.

“Currently if you operate a petrol vehicle, you pay fuel excise depending on how many litres of fuel you use and currently different users pay different amounts depending on the efficiency of the car,” Brown said.

“We don’t think it’s fair that petrol drivers pay a varying amount of tax on the upkeep of the road regardless of how many kilometres you drive on the road.”

National wants to make sure the upkeep of the road is a user-pays system as much as possible.

Brown said the plan will take time to roll out but setting up a plan is a priority for the first term.

“The fuel excise tax is incredibly easy to collect, but it will require better and more efficient technology to ensure the road user can be collected.”

Brown emphasised that there will be a change in how we charge for road use.

“We have also indicated there could be new revenue-gathering methods such as tolls and congestion charges.”

The Government currently receives income of around $4 billion per year from fuel excise and road-user charges on diesel vehicles (split roughly 50/50 between the two).

For petrol tax, 70c per litre goes to road funding, 6 cents to ACC, 0.7c to a local authority fuel tax and 0.6c to the Fuels Monitoring Levy. Aucklanders also pay an extra 10c in Regional Fuel Tax).

National will also ditch the Government’s clean car discount if elected and promises to build 10,000 new charging stations – about 10 times more than currently exist – toward which it would invest about $257 million over four years.

The announcement drew a backlash from the Green Party, with transport spokesperson Julie Anne Genter describing the clean car discount as one of the most successful climate policies New Zealand had.

The Labour Government said in this year’s Budget it will spend $120m over four years in a partnership with the private sector for new EV charging stations.