Fuel tax on hold - for now

04:45, Apr 26 2011
Petrol guage
PUMP PAUSE: The Government has put fuel tax increases planned for July on hold for a year.

Fuel tax hikes set down for July have gone on hold for a year, but increases totalling 3.5 cents a litre are set to go ahead from next year.

Transport Minister Steven Joyce said fuel tax increases of 1.5 cents per litre due to kick in on July 1 would be deferred.

Because of the "ongoing economic impact" of the global recession and the Christchurch earthquakes, it made sense to hold off on the increase for another year, Joyce said.

However, fuel tax increases "in the order of" 2 cents per litre in 2012 and a further 1.5 cents per litre in 2013 would probably be needed.

The fuel tax has already gone up with 3 cents a litre hikes in October 2009 and 2010. The Road User Charge, which is levied on diesel vehicles, went up by 7 per cent on average in the October 2010 hike.

The tax increases were proposed as a replacement to a new regional fuel tax, which the National-led Government scrapped.

The tax is supposed to fund the Government's $11b roading plans. Joyce said deferral of the planned 1.5 cent hike would not "significantly affect" the roading plan.

However, officials were working on an updated plan of transport priorities and how they would be funded. The new plans included support to repair Canterbury's transport infrastructure.

"In order to deliver this programme of investment, it is likely that the government will need to increase [fuel taxes] in future years.  These could be in the order of 2 cents a litre in 2012 and 1.5 cents a litre in 2013," Joyce said.