Editorial: High petrol prices call tax into question

Editorial

Petrol has long been an easy source of revenue for Governments of all stripes in New Zealand. The tax is swallowed in the price at the pump and fractional annual increases are hardly noticed, mainly because the market price of petrol fluctuates so much.

When the price is down below $1.40 a litre, the Government is responsible for well over half the charge at the pump but, ironically, it is when the market price is high and the Government's take therefore is proportionately smaller that the tax is more likely to be resented.

Right now the price is very high — around $2.40 a litre for 91 octane — and the National Party clearly senses public resentment is building. National has calculated that the Government's 3.5c increase in petrol excise this month means the average household is paying $200 a year more in petrol taxes than it was last year.

The Prime Minister responded yesterday that petrol company margins are now twice what they were 10 years ago. This merits further investigation once the Commerce Commission has been given the necessary powers. But the level of taxation remains questionable too.

The Automobile Association has called for GST to be removed from the excise component of the petrol price. At that time it would have meant a reduction of 10c a litre and the retail price was around $2.30. So the reduction would have been wiped out by the price rises since. It would seem a mistake to complicate GST for the sake of transient relief.

The Government has scheduled an increase in the petrol excise over each of the next two years and it has allowed the Auckland Council to levy an additional tax on petrol sales in its region.

The council's additional 10c a litre, on top of the Government's take, was introduced in July with remarkably little complaint.

But it would be unwise of the Government to believe the public's tolerance of rising petrol taxes is unlimited.

Petrol may be a prime source of climate-changing carbon emissions and higher prices may be the most effective antidote to its use but National leader Simon Bridges is right to point out that petrol is also an unavoidable cost for families and business.

"It is the cost of getting kids to school and groceries home from the supermarket. It is the cost of getting goods and services to your customers," Bridges says. "Rather than imposing more taxes [the Government] needs to get its own spending under control and it could start with finding a more cost-effective solution than the billions of dollars it wants to spend on Auckland's trams."

Motorists do not much mind that some of their petrol taxes go to public transport but the more they have to pay for petrol the more attention they will pay to the need for the taxes on it and the use to which the money is put. The Government would be wise to take heed, tolerance of petrol taxes may be reaching the limit.