Road User Charges evasion in New Zealand - some changes come into force

For all of the talk of distance based road user charging or VMT as it is called in the US, New Zealand has been quietly charging all vehicles over 3.5 tonnes and all diesel cars on a weight/distance basis on all roads since 1978.

One of the perpetual issues with any form of road pricing is evasion.   In New Zealand, the Road User Charge (RUC) collects about NZ$900 million  (US$728 million) a year, and Radio New Zealand now reports that around NZ$51 million (US$41million)  on top of that is lost through evasion, about a factor of 5%.

The report also indicates the cost of operating the system at up to NZ$17 million (US$13.7 million) a year, a factor of only about 2% of total gross revenue.  These are costs of administration, collection and enforcement.  It's worth noting that the only minimum requirement in New Zealand for heavy vehicles is to have a working certified hubodometer that measures distance travelled, and for distance to be bought in advance, although GPS based electronic options are available.  This relative simplicity (with vehicles buying licences according to their maximum permitted weight, now) has resulted in such low operating costs.

However, enforcement itself as of yet only recovered NZ$2.2 million (US$1.8 million) in unpaid charges (fines go to the government and are not counted as revenue to the National Land Transport Fund). 

A series of reforms of the system come into effect as of today to help reduce evasion:

-  All heavy vehicles will have a permanent "RUC weight" instead of being charged according to the maximum carried on any single particular trip;

-  As a result, no longer will supplementary licences to carry additional weight be necessary;

-  Time licences for a small category of vehicles that primarily work offroad are abolished;

-  Administrative charges for purchases of RUC licences are to be reduced by 39% (from NZ$3 (US$2.42) to NZ$1.83 (US$1.48)).

More details on the Ministry of Transport and NZ Transport Agency websites.

Meanwhile, it's worth noting that RUC also applies to diesel cars, but some journalists don't understand why.

The reasons are:

-  There is no fuel excise duty on diesel as a significant proportion of diesel is not consumed on public roads (and in New Zealand as fuel excise duty revenue is hypothecated to the National Land Transport Fund, such tax would need to be refunded adding an administrative burden to those users);

-  The correlation between fuel consumption and the infrastructure costs of roads used is poor.

Alastair Sloane of the New Zealand Herald says that it makes the fuel efficiency of new diesel cars not so relevant against petrol cars, but then RUC isn't intended to be a tool to promote fuel efficiency, it is to pay for roads.  In fact, the issue with tax on petrol is that it isn't keeping pace with fuel efficiency to reflect the growing costs of highway capital.

David Linklater in the same newspaper make a similar mistake.  He's upset that the RUC paid offsets the fuel efficiency savings, which again indicates that tax on petroleum is relatively cheap and not reflective of highway costs as much as RUC is.  However, I don't expect writers of car reviews to have a grasp on the economics or policy ramifications of different forms of charging for road use.