GST on Petrol

April 23rd, 2008 at 8:48 am by David Farrar

The AA has called for GST to be removed on the excise portion of petrol, reports the Herald.

spokesman Mark Stockdale last night urged the Government to consider removing on petrol excise tax, a move it says could cut prices by more than 5c a litre. …

But a statement from Finance Minister ’s office last night said the Government would not change the GST system, “as creating exemptions would add extra compliance costs for businesses which would be passed on to consumers”.

A one-off change to GST would have had no effect against the “global forces” driving .

“If the New Zealand Government had changed GST rules along these lines 12 months ago, no one would have even noticed as the benefits would have been wiped out almost immediately by the global rise in oil prices,” the statement said.

I’m with Dr Cullen on this one. First of all I think an absolute strength of GST is that is is near universal for all goods and services. The moment you start varying out a few exemptions, you then end up in an endless litany of moral judgements on what should or should not have GST on it. In Australia you have (or had) GST on your bread if it has sultanas in it, but no GST if no sultanas.

Cullen is also right that piddling about with stuff that will knock 5c a litre off only, when retail prices have almost doubled in the last few years, will not even be noticed.

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28 Responses to “GST on Petrol”

  1. mawgxxxxiv (556 comments) says:

    Good on the AA for advocating for their members but agree totally pointless and an unwise precedent. Having said that I think the Auckland Regional petrol tax should be balanced with a GST elimination/reduction on coffee sold in Ponsonby & Herne Bay :-)

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  2. PaulL (5,987 comments) says:

    Agree. If you agree at all with the promise to reduce carbon emissions (which this government made on our behalf) it would be absolutely insane to reduce taxation on petrol at the moment. Increasing the excise portion (and therefore the GST) would be more likely.

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  3. Craig Ranapia (1,915 comments) says:

    The moment you start varying out a few exemptions, you then end up in an endless litany of moral judgements on what should or should not have GST on it. In Australia you have (or had) GST on your bread if it has sultanas in it, but no GST if no sultanas.

    And taking the Australian example, I don’t think its overly cynical to wonder if advocates on both sides of the House of the mare’s nest of exemptions were influenced less by good argument than by very good lobbyists ranging from unions to industry.

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  4. Zippy Gonzales (485 comments) says:

    Heh, like throwing stones at a brick shithouse:

    Dunne wants rates excluded from GST
    Public Health lobby wants food excluded from GST
    AA wants petrol excluded from GST

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  5. Lee C (4,516 comments) says:

    Could it be therefore argued that to raise GST by say 5% would be a good idea for the nation if it were applied across the board? The calls for the relaxation of GST on fuel are not based on a moral desire, they are based on a real worry that the petrol costs are being spread across the board to households as food prices go up. Then the argument that petrol is bad for you (carbon-wise) is just the same kind of bolony they apply to beer anbd fags isn’t it? Oh it is suddenly a moral imperative to over tax some goods because they are ‘bad’ for you. You can’t have your cake and eat it.

    The Government were happy for example to allow NZ to be a clearing house for second-hand four wheel drives, and the sale of those was in part justified by the low cost of fuel. Now we are a nation with fuel-guzzling white elephants in our front yards, but guess what? No one had a word to say about those at the time, regardless of how ‘good for us’ they might not have been.

    How much of the money we spend a the pump goes to the government? If that taxable percentage is changed according to ‘Global Oil Prices’ then I can see an argument about benefits of oil hikes being wiped out. If the % remains constant regardless of the global price, then we are being rorted by the government, because in anyone’s book 15% of $1.00 will always be less than 15% of $2.00, and all the moralistic ‘oh we’re doing it for your own good’ eye-candy in the world won’t alter the fact.

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  6. big bruv (13,929 comments) says:

    Cullen’s response is great news for the Nat’s, for some time I had been of the opinion that Cullen would drop GST from fresh food and essential food stuffs, with this one swoop he could have hammered the Nat’s plans for tax cuts as they would have been forced to follow suit.

    I do however find myself in the very uncomfortable situation of agreeing with Dunne re GST on rates, why do you have a tax on a tax?

    [DPF: One of the reasons is if you exempt local govt from GST, then they may gain a commercial advantage in some of the areas they compete with the private sector]

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  7. Brabus (31 comments) says:

    Wait a second the AA aren’t arguing a removal of GST on petrol merely the excise duty on petrol. As such no exemption is necessary, it’s just that GST would get charged on the base rate for the good not the compound value of good plus tax.

    Unless I’m missing something here why should excise duties be taxed? surely GST should only apply to the fair market value of the good or service prior to other taxes being added

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  8. Redbaiter (13,197 comments) says:

    “Agree. If you agree at all with the promise to reduce carbon emissions (which this government made on our behalf) it would be absolutely insane to reduce taxation on petrol at the moment. Increasing the excise portion (and therefore the GST) would be more likely.”

    Go and join the Labour Party why don’t you. GST or whatever, the tax on petrol is a tax on the living standards of all NZers. The carbon emissions “industry” is a third world style scam. Cut taxes on petrol entirely. Cut taxes on the petroleum industry. Free up the exploration industry. These are the solutions a National Party member should be advocating. The problem is the party is so contaminated with people who think only a few degrees differently to Labour, and you’re one of them Paul. Change is needed. Not the same old same old tax and spend mentality of unimaginative ideologically treasonist bores like you.

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  9. big bruv (13,929 comments) says:

    DPF

    It is not local govt that is paying the tax on the tax, it is us, the so called “rich pricks”
    The sooner we introduce a poll tax the better, why should I subsidise all the bludgers in state houses and those who rent.

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  10. pdm (844 comments) says:

    If the Govt was to reduce any tax on petrol it would have to be the excise duty and/or any regional or similar taxes that have been included over recent years. The increase in ACC levies being one – although technically not a tax it is still a Government Charge which they have room to move on.

    GST on petrol would then reduce as well in $ $terms.

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  11. Ross Nixon (559 comments) says:

    Cullen, reduce the excise duty, you thief! (I mean that in the nicest possible way)

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  12. toad (3,674 comments) says:

    Funnily enough, I would agree with DPF too. A consensus of a Labour Minister, a Nat and a Green. How unusual!

    The best thing about GST is its near universality. If you start having exemptions for this and that (and there are some who put up arguments that food should be exempted so it is more affordable to people on low incomes and benefits), the more complex the tax system becomes. We don’t want the situation that exists with consumption taxes in many countries overseas where ordinary taxpayers have to hire expensive tax consultants just to complete their returns.

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  13. freethinker (691 comments) says:

    DPF

    Whilst I agree that the simplicity of GST is admirable taxing a tax is totally immoral. As Big Bruv poinyed out rates are effectively a local tax so taxing it again is wrong. If not explain how Excise duty (Tax) and local authority rates levied not on services provided but on value of property fit the definition of a good or service. As every person in NZ is a taxpayer a poll tax as a rates substitute is practical and has the benefit of removing the duplication of collection services in local authorities releasing those staff to the productive sector of the economy were they are badly needed.

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  14. RRM (9,933 comments) says:

    Dr Cullen should print out this post and frame it. Fancy Kiwiblog being in agreement with a Labour Finance Minister!

    Redbaiter: If there are areas of policy agreement between the two overwhelmingly largest parties in Parliament, then either:
    (1) These are widely considered to be good ideas, or
    (2) You’re right and EVERYONE else is wrong! :-)

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  15. Redbaiter (13,197 comments) says:

    Look, I agree that GST, if it must be in place, should not be subject to exemptions. I just emphatically reject the idea that the more money we alllow government to steal from us, the better off we will be. More to the point, that is a view that should be shared by EVERY damn member of the National party, and if they cannot agree with that view than they should just fuck off and join Klark’s band of cronyists crooks and thugs and be damn well done with it. We need an opposition, and an opposition with competing ideas, not a fucken lame duck band of mentally crippled leftist sycophants who share the same socialist vision as Labour.

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  16. Rex Widerstrom (5,354 comments) says:

    Redbaiter says:

    GST or whatever, the tax on petrol is a tax on the living standards of all NZers… Cut taxes on petrol entirely.

    Indeed. What is the justification for picking a particular item and saying “we’ll double the price of that by adding excise”?

    As an aside, yes the GST exemptions in Australia are crazy… I marvel at the checkout receipt which shows by way of asterisks those things that are charged and those that are exempt. But exemptions don’t have to be complex. A rule which says “if it’s designed to be eaten or drunk, or to be a component of something that’s eaten or drunk, there’s no GST” isn’t hard. Rates and petrol, being discrete items, are even simpler to exempt – if you wished to. So the “it’s too hard” argument doesn’t really stand up – the Australian mess is, as it’s the result, as Craig surmises, of all sorts of lobbying and pork barreling. Personally, I think universally applied consumption taxes like GST are amongst the fairest means of raising revenue, and should be used in substitution for taxes on earnings whereever possible.

    Meanwhile big bruv says:

    The sooner we introduce a poll tax the better, why should I subsidise all the bludgers in state houses and those who rent.

    Ahem. I’m not sure about those in state houses, but us struggling private renters pay an amount which not only pays the owner’s mortgage and their upkeep on the property, but also covers their rates bill. So we’re indirectly ratepayers – something that’s acknowledged in the fact we’re allowed to vote for councils rather than the privilege being restricted to the landed gentry such as yourself ;-)

    Hang in there, big bruv, I’m sure the rights that have been denied the land owning class will be restored eventually, and you’ll get to enjoy droit du seigneur again, too ;-P

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  17. gd (2,286 comments) says:

    Local body rates are the worst form of discriminatory revenue gathering possible.

    They take no account of the actual ability to pay and have no relationship to the services or quantity of services consumed.

    And then to add insult to injury a third party (the Gumint) then collects a tax on top of an existing tax.

    As for GST Leave it as it is Having worked in the worst example of such taxes the UK in the 1970s the more you fiddle with it the worse it gets and the more loop holes you open up for evasion and the lower the collection rate.

    If the Socialists were really serious about ‘helping their people” they would reduce the duty content on fuel.

    For me the sooner it gets to $5 a litre the better so we get the old Japa shit carts of the road and free up the congestion so only the RIGHT and I do mean right people can use their motor cars.

    The Socialist supporters can use the bus or train

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  18. labrator (1,850 comments) says:

    It would be good if everytime you bought petrol the receipt showed you all the components of the price you just paid rather than just the total and the gst. That might wake a few people up as to where all of the money is going and how much you’re paying each time.

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  19. roger nome (4,067 comments) says:

    NZ already has extremely low petrol taxes in the international context (in the bottom 20% of OECD countries)- see the fourth graph at the following link.

    http://www.med.govt.nz/templates/ContentTopicSummary____20094.aspx

    The main reason other developed countries generally have about twice as much tax on their petrol is to make their economies less vulnerable to oil price spikes (i.e. if you have a 200% tax on petrol you can easily absorb a temporary tripling in oil price by lowering taxes on petrol (most OECD countries chose to do this after their economies were devastated by the various oil shocks of the 1970s and 1980s which almost ruined their economies at the time) . In this way these countries have greater energy security, and are less dependent on foreign oil – and their economies are more stable and secure for it.

    If anything we should be increasing tax on foreign sources of energy, and decreasing taxes on domestic supplies so we can enjoy greater economic security. I doubt this logic will appeal to the dogmatic right-wing ideologues of the kiwiblog right though – it makes too much sense.

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  20. Redbaiter (13,197 comments) says:

    “NZ already has extremely low petrol taxes in the international context (in the bottom 20% of OECD countries)-”

    A big list of hopeless basket case socialist sewers taking more tax than this bunch of fucken thieves is no justification for any point of view on tax in NZ or anywhere. Fuck off and stop wasting my time you shallow fat fool.

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  21. roger nome (4,067 comments) says:

    Wow baiter – I see that you’re lucid and rational as ever. Might as well be arguing with D4J.

    BTW I’m not fat – i.e. when was the last time you pulled off a 3km run in less than 11 minutes, or a set of 40 pushups? Why never you say?

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  22. baxter (893 comments) says:

    The tax(excise) on petrol should be an actual amount in cents not a percentage, then any increase in GST would be on the supplier’s price. As it stands Cullen is raking in extra tax both in the percentage increases and the increased GST obviously creating distortion in Treasury estimates. This being done at the expense of living standards , increases inflation and restricts productivity…Incidentally the Goverment share of the price of petrol was 47% before thay added an extra r5cent green tax on 1/4/08.

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  23. LC (162 comments) says:

    I’ll swap you an increase in Excise duty and GST on petrol, for NO personal income tax…..

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  24. roger nome (4,067 comments) says:

    “As it stands Cullen is raking in extra tax both in the percentage increases and the increased GST obviously creating distortion in Treasury estimates.”

    So – we make carbon cheaper to buy, so we burn more of it (meaning we’re screwed under Kyoto, and we contribute more to global warming), and we make our economy more vulnerable to oil price spikes (which will become an issue once again when non-opec production peaks around 2010, and OPEC gains the ability to dictate global oil production levels). Brilliant, just brilliant!

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  25. LC (162 comments) says:

    So Roger we take the medcine now rather than later? I have an idea – lets use the money earnt from petrol to develop and put in place alternative energy systems so that in the mid-future (say 10 years) we have an economic individualised transport system (i.e. my car – not public transport) that uses no imported petroleum products.

    All we need is a strategic infrstructure plan, and stable government for 10 years, and the willingness to forgoe the money that we would have placed into the general account, into this infrastructure.

    I don’t have a proposed solution, but I’m sure we can do it.

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  26. Rex Widerstrom (5,354 comments) says:

    roger nome suggests:

    The main reason other developed countries generally have about twice as much tax on their petrol is to make their economies less vulnerable to oil price spikes (i.e. if you have a 200% tax on petrol you can easily absorb a temporary tripling in oil price by lowering taxes on petrol)

    That’s a novel approach roger. The same line of thinking would suggest an income tax of around 80 percent, so that if wages fall Dr Cullen can offer a small tax cut which maintains parity. I assume you’d be happy to pay it. That approach also assumes, of course, that Dr Cullen (or Mr English, for that matter) is omniscient, or at least smarter than me and thus better knows how to spend my money. You’ll forgive my hubris, I hope, when I beg to differ.

    But sarcasm aside, you’re suggesting that it’s a good thing to have a commodity which is not only used by private vehicle owners but by almost every business (and thus on-passes costs throughout almost every aspect of the economy) vastly over-priced, thus contributing to inflation. And then you suggest that when the market signals that this commodity is becoming more expensive (but not nearly as expensive as we’re actually paying for it) (and perhaps more scarce, depending on whom you choose to believe) then that signal should be quashed by an all-knowing, benificent government.

    Socialists really do live in a quite curious world.

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  27. liz_shaw (24 comments) says:

    Removing GST is only a temporary measure because at the rate petrol is currently rising it won’t have long term benefits.

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  28. Grant Michael McKenna (1,160 comments) says:

    New Zealand’s GST system is well structured. I would think that it would be interesting to compare the effects of Australia’s system to that of New Zealand’s, as Oz does have all kinds of strange exemptions- admittedly, the tax is a regressive tax, having a more pronounced effect on lower income earners by consuming a higher proportion of their income compared to those earning internationally competitive incomes, but they receive benefits as a higher rate, so it balances out…

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