Brian Rudman: Taxing carparks the right move

Photo / Steven McNicholl

Rush-hour traffic jams are the result of a subsidy that encourages bigger cars and living further away from work

The Government really must be strapped for money. It's so short that to scrape in an extra $17 million or so of petty cash it's willing to break an election pledge and upset a group of core supporters.

On the election trail in 2005, National's then finance spokesman, John Key, thundered against the Labour Government's plans to expand the fringe benefit tax to include free staff carparks. He told the Auckland Rotary Club that National would overhaul the FBT and "cut the red tape and compliance costs that are choking our businesses and preventing them getting off first base".

He would not entertain suggestions of applying FBT to on-premises carparks. "National will restore common sense between Government and the private sector."

This week, the FBT Action Group, an unholy alliance of manufacturers, employers, property owners, a carpark conglomerate and Matt McCarten's low-paid worker union Unite began a campaign against just such an extension of the FBT.

"A discriminatory and inefficient piece of legislation," fulminated Property Council chief executive Connal Townsend.

Even the Labour Party has got in on the act, revenue spokesman David Cunliffe rushing out a statement headed "National's carpark compliance catastrophe". A catastrophe, he and his colleagues once planned to introduce.

There is discrimination, but not in the way Mr Townsend means. It is the existing scenario that is discriminatory, providing an untaxed $5000 or more perks to car-driving workers - many in company cars that are an additional perk - which their cycling, walking and public transport-using colleagues don't get.

A report by Booz and Co, "Company Cars and Fringe Benefit Tax", prepared for the New Zealand Transport Agency in February 2012, concluded: "Parking subsidies provide a significant untaxed benefit to employees who drive which is not provided to those who use other commuter modes. Many employees pay nothing for parking as it is provided by their employer. Any introduction of a price would have an impact on travel behaviour."

These subsidies are worth more to employees than their cash wage value, and do not only encourage recipients "to drive [rather] than use alternative modes of transport", but also encourage people to have bigger cars and live further away from their workplace, thus encouraging "automobile-dependent sprawl".

In other words, the discrimination in the tax laws favouring free employee car parking is helping cause the rush-hour traffic jams in Auckland and Wellington that Mr Townsend, wearing another hat, is so eager to jump up and down about, demanding billions of dollars more expenditure on new roads and harbour crossings.

A smarter right-wing Government would have latched on to the distortions the taxation system creates in the transport market, and painted the present move as a levelling of the playing field. Instead, it's making no friends by treating it purely as a simple tax-gathering exercise.

The Booz and Co report underlines how the free parking perk does not only deprives Inland Revenue of revenue: "Commercial public transport becomes more viable when users pay directly for parking", particularly in Auckland and Wellington's congested CBDs where parking costs are highest. Employer-provided free parking in downtown Auckland and Wellington, "provides a direct incentive to drive to the very destination that is most congested and best served by public transport".

The report averaged the annual cost of early-bird parking at 10 Auckland CBD parking buildings for 229 days as $2725, the actual range varying from $1832 to $4580. They compared that with public transport "after tax" costs of their colleagues who received no carpark privileges. Over the same period, the cost of train travel ranged from a one-stage train journey at $575 to a five-stage bus fare totalling $2622. A 12-month pass on both modes totalled $2700. In other words, the actual subsidy is around $5000.

The report authors would not have been surprised who is stirring up the present outcry. "Most opposition to reform is likely to come from those fleet providers, employers and employees who currently benefit from the current tax policy. Employers can reduce wage costs by substituting wages for company cars and parking. Employers have access to discounted vehicles."

Of course, from a transport planning viewpoint, taxing the carparking perk is not going to remove the existing discrimination in favour of car-users. The new tax will come to around $1000, depending on the tax scale of the employee. Presumably the employer will pay, but even if not, it's a lot cheaper than a public carpark - or public transport.

In Ireland, the law allows employers to provide public transport passes to employees in lieu of salary on a before-tax basis. In San Francisco, 43 per cent of passengers on Bart, the rapid transit system, work for employers offering a public transport benefit programme.

Before its absorption into the new Super City, Waitakere City was one of the few employers in Auckland to subsidise staff who caught public transport to work. When it moved to its new headquarters beside the railway line at Henderson in 2006, the council introduced a 50 per cent subsidy on train and bus fares for employees. Public transport use among the 650 employees jumped from 3 per cent to 12 per cent in a few months. The cost - subject to fringe benefit tax - was offset by the need to provide fewer carparks. Auckland Transport now occupies the building - but doesn't continue its predecessor's pioneering lead.