If the government introduces a tax on diesel to fund transport it must first sort out the "cumbersome and costly" fuel excise duty rebate system, Federated Farmers told a select committee last Thursday.

Transport spokesperson Guy Wigley told the Finance and Expenditure Select Committee while there is a rebate applying to off-road petrol use, many farmers don't bother to "Extending the fuel excise duty off-road rebate to diesel, which is much more heavily used in agriculture than is petrol, will likely result in a big increase in claim volumes and an increase in compliance costs."

"Forestry, fishing, rail and maritime sectors would be similarly affected, adding pressure on administration of the rebate.

"Running a dual refund system which includes diesel for Auckland but not for the rest of the country will add further complications and confusion," Guy said.

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The Federated Farmers submission supported increased investment in transport infrastructure and acknowledged the case for extra revenue to be raised for specific transport projects that might otherwise crowd-out investment in other regions.

"It's not just Auckland that needs investment. Rural roads need to be improved, especially for safety, and they need more funding for maintenance." The Federation has long held concerns about regional fuel taxes (RFT), and the prospect of RFT revenue collected from rural road users being used solely to fund urban projects.

"However, if an RFT is to proceed and be collected from rural areas of a region, then it is only fair for revenue to be spent on activities in rural areas as well as urban areas.
"That should be written into the criteria in the proposed amendment bill."