National promises 5c petrol tax cut

Don Brash said the fuel tax cut would last until April.

National leader Don Brash today pledged to cut petrol tax by 5 cents.

The short-term cut would last from next month until April if National forms the next government, he said.

He said it would cost $100m but claimed the government had already received a windfall from consumers in recent months from rising fuel prices.

Brash said there would be no cut to road funding as a result of a fuel tax cut, which he said would save the average motorist an estimated $3 a week.

He said he would not consider removing GST from petrol -- one of the pledges of New Zealand First leader Winston Peters -- but conceded GST tax from petrol had increased substantially in recent months.

Labour's Finance Minister Michael Cullen said today there was no tax windfall for the Government from higher petrol prices and he said National's tax cut would affect its ability to deliver other areas of its policy.

A Herald-DigiPoll survey of 801 people last week found 77.1 per cent supported a cut in petrol tax, compared to 18.3 per cent who were prepared to keep paying tax at current levels.

Petrol prices increased again last week, by 3c a litre, to an unprecedented $1.559 for 91-octane petrol and more for higher grades at most city pumps, though today major oil companies dropped prices by 2-3c a litre.

Dr Brash told concerned Grey Power members last month that his party could not afford to wipe a 5c a litre petrol excise rise imposed in April, while also cutting income tax.

The Government's overall tax take from $1.559 a litre is just under 65c, or 41.7 per cent of the retail price.

Of a 47.7c pre-GST tax take, 22.5c is earmarked specifically for the National Land Transport Fund, although the Government says it will return $1.225 billion from its general account in the next three years to roads and other transport spending.

A Treasury report prepared in August 2000 said price rises "are likely to lead to little change in tax revenue in the short-term and an increasing reduction in tax revenue in the longer term".

Shell this morning announced it was cutting fuel by 2c, bringing the standard cost of 91 octane petrol to 153.9c.

Two other major petrol companies also dropped their prices. BP lowered its price by 2 cents across all products, and Caltex said it planned to follow suit.

Shell spokeswoman Jackie Maitland said: "A dip in crude oil prices and slowing demand has led to lower prices

"Ninety-five per cent of our retailers should be able to put the price down today."

- NEWSTALK ZB, NZPA