Electric Cars Cutting NZ Road Funds

January 31, 2018 Taxation in New Zealand

electric vehicle taxesWELLINGTON – Electric cars could be jeopardizing the future of New Zealand’s highways.

The principal adviser for the Automobile Association of New Zealand, Barney Irvine, has issued a warning that the increasing uptake of electric vehicles in the country could threaten the funding needed to maintain and develop the national road infrastructure.

Currently, the maintenance, upgrades, development, and police enforcement of the national highway system is funded from the National Land Transport Fund.

The money used in the fund is derived from the tax levied on the sale of petrol, with approximately NZD 0.50 per litre being diverted to the fund.

Diesel cars also contribute to the fund via an annual tax bill levied at a rate of approximately NZD 0.06 per kilometre driven, as diesel is not subject to the same taxes as petrol.

Electric cars are currently exempt from the road user charges faced by diesel cars, and they will remain exempt until electric vehicles make up 2 percent of the national fleet.

The 2 percent threshold is expected to be reached in approximately 2021.

Barney Irvine claimed that the treatment of electric vehicles will result in a growing gap in road funding.

The national Transport Ministry expects that in 2021, when the exemptions are dropped, the total cost of not charging road user charges for EVs will reach NZD 70 million.

Further, the Transport Ministry believes that the current tax breaks are balanced to ensure that in the long term the road funding does not suffer.