Road User Charges Bill questions and answers

The Road User Charges Bill was introduced to Parliament on
25 November 2010. The Bill received its first reading on 15 February 2011 and has now been referred to the Transport and Industrial Relations Committee (the committee) for consideration.

Read the questions and answers about the Road User Charges Bill below.

What are the proposed changes in the new Bill?

The Road User Charges Bill 2011 includes provisions that will:

• establish new governance arrangements for the road user charges (RUC) system
• change the definition of vehicle weight for RUC licence purposes
• remove the time licence system and update the list of vehicles exempt from paying RUC
• improve the regulatory framework for electronic RUC providers
• set out record keeping requirements for transport operators
• establish an assessment process that will help the New Zealand Transport Agency (NZTA) to recover unpaid RUC
• allow the Police to apply for search warrants in relation to certain RUC offences
• update the offences and penalties regime
• allow the NZTA to waive a RUC debt in certain circumstances

Why do we need these changes?

Overall the legislation aims to reduce compliance costs and be fairer for all road users.

The RUC system was established in 1978. The age of the system means that it is not performing effectively. These changes are aimed at bringing the system into the 21^st century.

The new legislation will:

• modernise and simplify the RUC system
• help to improve compliance which will give the system greater integrity and reduce RUC evasion
• provide for an improved regulatory framework to support the uptake of electronic RUC
• provide for a fairer and simpler structure in relation to offences and penalties

What legislation will be changed?

The Road User Charges Act 1977 and the Road User Charges Regulations 1978 will be replaced with a new RUC Act and regulations.

When will the proposed changes take effect?

This depends on when the Bill is passed. At this stage it is expected that the Bill will be passed in mid-2011 and come into effect in mid-2012. This allows time for consultation with key stakeholders on the regulations which will be made after the Bill is passed, and for the NZTA to make the necessary changes to its administrative and IT systems.

Who has been consulted on the provisions in the Bill?

The Ministry of Transport has consulted organisations representing road users and other interested stakeholders on the provisions in the Bill.

The Ministry has worked closely with the NZTA and NZ Police on the drafting of the Bill. The Ministry has also consulted with other government departments and agencies (including the Treasury, Ministry of Justice, Ministry of Economic Development and the Privacy Commission) on the contents of the Bill.

There will be further consultation with key stakeholders before the new regulations are made.

Progress of the Bill

How do I know what stage the Bill is at?

You can follow progress of the Bill on the Parliament website here: www.parliament.nz/en-NZ/PB/Legislation/Bills

The Ministry of Transport (www.transport.govt.nz) website will also be updated to reflect the progress of the Bill through the House.

Governance of the RUC system

What are the proposed changes to the governance arrangements for the RUC system?

The Bill enables responsibility for the collection of RUC to be transferred to the NZTA.

Who is the RUC collector?

The RUC Collector will be either the Chief Executive of the Ministry of Transport or the NZTA if appointed under regulations.

How does this arrangement differ from what is in place at present?

At present all functions of the RUC system are the responsibility of the Chief Executive of the Ministry of Transport. However, the Chief Executive has delegated responsibility for certain functions to the NZTA. The new arrangement will enable responsibility for certain functions of the RUC system to be conferred directly to the NZTA.

Who decides who will be the RUC collector?

Cabinet will make a decision about who will take responsibility for different parts of the RUC system. This will be done before the new RUC Act comes into force.

How will this change how the system is administered?

From a customer’s perspective this new arrangement will not alter how the system is administered as the NZTA will continue to be responsible for the day to day issuing of RUC licences and the collection of RUC.

Change to vehicle weight definition

How will RUC weight be defined?

Under this Bill, all RUC vehicles will be assigned a permanent RUC weight.

The Bill defines RUC weight as the lesser of the

• gross vehicle mass for the RUC vehicle; or
• maximum allowable mass for the RUC weight under section 4 of Part 1 of the Vehicle Dimensions and Mass Rule 2002 (VDAM Rule 2002)

For light vehicles and smaller trucks this will usually be the manufacturer’s maximum gross weight rating, while for larger trucks it is likely to be the maximum weight allowable for vehicles of that type under the VDAM Rule 2002.

Why is the licence weight definition being changed?

Changing the definition of licence weight will greatly simplify administration for both industry and government agencies.

Currently a vehicle operator has to estimate the actual gross weight to be carried by a vehicle during the journey. It can be difficult to predict the weight to be carried in advance and scales are not always available at loading sites.

It also means that the door will close on weight-based evasion because an operator will no longer be able to underestimate the weight of the vehicle and purchase an incorrect RUC licence. It is also difficult to recover outstanding RUC by making an after-the-event assessment of weight.

How will these proposed changes affect businesses’ costs?

The changes to the system will mean vehicles that are similar will pay similar levels of charges. Heavy vehicles as a group will continue to pay the same amount as at present, covering the road damage they are responsible for. The changes will also encourage the most efficient use of these vehicles.

There will be time savings for all transport business operators through the simplification of RUC licence purchases and less complex roadside enforcement checks.

Some operators will find that their RUC payments increase as a result of the change, while others will see a decrease, depending on the nature of the loads they carry and their choice of vehicle. The marginal changes are however likely to be relatively small compared to total truck operating costs and the change should affect all operators who carry similar loads equally.

Will this have any impact on light diesels (under 3.5 tonnes)?

The new definition of weight will not have any significant impact on how light vehicles are classified or charged under the RUC system. The definition of light vehicle will stay the same, that is, up to 3.5 tonnes gross vehicle mass. The nominal weight of some vehicles will be higher for RUC purposes than the current licence weight, but any effect on charges will be very marginal.

What will happen to supplementary licences?

The current system of supplementary licences will be removed from the RUC system.

Additional charges will apply for:

• the carrying of indivisible, overweight loads on a one-off basis (for example when moving houses)
• high productivity vehicles

How will high productivity vehicles be dealt with under the new system?

Vehicles that are issued with permits to operate above their normal gross mass under the VDAM Rule 2002 will make an additional payment of RUC that recognises the extra damage they do to the road.

This payment will most likely be made at the time operators purchase their normal RUC licence.

How much will the additional charges be?

The cost of RUC licences, including any additional charges for over weight or high productivity vehicles, will be determined by regulations to be made under the new RUC Act. It is intended that total charges for higher than standard weight vehicles will be at a comparable level to charges under the current scheme.

Will my RUC licence still be valid after the changes come into force?

The validity of RUC licences for light diesel vehicles (those with a gross vehicle mass of less than 3.5 tonnes) issued prior to the changes coming into force will not be affected.

RUC licences for heavy vehicles (those with a gross vehicle mass of 3.5 tonnes or more) will expire one month after the changes come into force. Operators of these vehicles will have to apply for a new RUC licence but will be able to claim a refund for any kilometres remaining on the old licence at the time of expiry.

Removal of the time licence system

What are time licences?

A small number of vehicles (various heavy machinery related to construction, forestry and road maintenance; unregistered motor vehicles operated under trade plates; and some tractors) currently purchase time licences to travel on the road for a certain period of time.

Distance licences are inappropriate for these vehicles as most cannot easily be fitted with distance recorders and/or travel on the road infrequently.

Why are time licences being discontinued?

The time licence system applies to just over 1 percent of vehicles, is costly to administer and adds unnecessarily to the complexity of the RUC system. It is also difficult to objectively set a fair charge for time licences.

Will time licences be replaced?

Vehicles at present subject to time licences will in future be exempt from RUC, but will continue to contribute to road maintenance costs through the payment of annual licence fees. In some instances those fees will be increased.

How will I know if my vehicle is exempt from paying RUC?

The list of exempted vehicles will be defined in regulations that will be made after the Bill is passed. Officials will consult with industry before finalising the list of exempted vehicles.

Regulatory framework for electronic RUC system providers

What is electronic RUC?

This is the use of electronic distance recorders and electronically displayed RUC licences, as an alternative to mechanical hubodometers and paper RUC licences.

Who are ‘electronic system providers’?

An ‘electronic system provider’ is an organisation that enters into an agreement with the NZTA to provide RUC-related services to transport operators. These services include the provision of electronic distance recorders and the issuing of RUC licences electronically. Providers can provide transport operators with RUC services in conjunction with a variety of other services including vehicle tracking and fleet management.

Why is an improved regulatory framework for electronic RUC required?

Electronic system providers carry out some administrative functions of the RUC system on behalf of their customers and act as representatives of the NZTA for the issuing of RUC licences and collection of RUC revenue. It is important that these providers be monitored and audited.

The RUC regulations were amended in 2009 to allow for electronic system providers but RUC legislation needs further updating to ensure the successful introduction of this technology and ongoing administration of independent electronic system providers.

What changes will help to improve the regulatory framework for electronic RUC?

The provisions in the Bill will introduce:

• a single application process for electronic system providers that covers both the authority to issue RUC licences and the approval of electronic distance recorders
• a framework that will allow the NZTA to audit the systems that electronic system providers use to provide RUC services
• a statutory requirement for providers to keep certain information
• rules around access to information held by providers

What information must electronic system providers make available to the NZTA?

If an electronic system provider knows or suspects that an electronic system (which includes an electronic distance recorder) has been tampered with they must report this to the NZTA.

The NZTA or the Chief Executive of the Ministry of Transport will also be able to request traffic or transport information from electronic service providers. This information can only be supplied if it is in aggregated form so that specific operators will not be identified. This information will be used for research purposes and to assist with future policy development.

Will the government have access to personal information held by an electronic system provider?

If the NZTA believes an operator has underpaid RUC, it can request that the operator’s electronic system provider supply them with ‘RUC information’.

‘RUC information’ relates mostly to the distance travelled by a vehicle liable for RUC. It also includes information relating to off-road travel (for the purposes of off-road refunds), purchasing of RUC licences, and faults with any part of the electronic RUC system.

The only personal information included in the definition of RUC information is the name and business address of the driver or the person responsible for buying RUC licences for the vehicle.

Improving compliance

Why does RUC compliance need to be improved?

RUC evasion is conservatively estimated at $30 million a year, for heavy vehicles alone. This means that all RUC rates have to be higher than would otherwise be the case to raise the same level of revenue and honest payers are subsidising those who evade payment.

What are the provisions in the Bill that will help to improve compliance?

The Bill includes provisions that will help to improve compliance through:

• the removal of operator nominated weights removing the opportunity for weight-based evasion of RUC
• more stringent measures around odometer tampering
• transport service operators being required to keep certain records that can be accessed by the NZTA
• the NZTA having the ability to issue binding assessments for unpaid RUC
• vehicle inspectors being required to report odometer readings to the NZTA as part of WoF/CoF inspections for assessment purposes
• updated offences and penalties, with a fairer regime for light diesel vehicles
• extending the Police power to remove hubodometers for the purposes of any criminal proceedings
• giving Police the power to apply for a search warrant in relation to certain serious RUC offences
• enabling the NZTA, upon suspicion that a distance recorder has been tampered with, to gain access to information stored on a RUC vehicle’s engine management system to determine the vehicle’s movements and/or to establish if tampering has occurred (this can usually be undertaken in a short period of time with the help of a laptop)

How will overloaded vehicles be dealt with?

The VDAM Rule 2002 and the Land Transport Act 1998 contain offences and penalties for vehicles found to be overloaded.

Record-keeping provisions

Why are more stringent record-keeping provisions needed?

Under the current RUC Act, vehicle operators are required to produce records for inspection to ensure compliance with the Act. However, the Act does not require records to be made or retained, nor does it prescribe a penalty for failing to produce records. As a result, the requirement for operators to produce records is not effective.

The improved record-keeping provisions will help to ensure that the NZTA is able to efficiently recover unpaid RUC.

Who will have to keep records under the new legislation?

Holders of transport service licences will be required to create and retain certain records to demonstrate compliance with the RUC Act. Transport service licences are defined in the Land Transport Act 1998 and are held by operators of taxis, shuttles, vehicles used in vehicle recovery (towing), goods service vehicles with a gross vehicle mass of 6000 kilograms or more and large passenger service vehicles.

It will be an offence not to make, retain or produce the required records.

This requirement will not apply to private and trade vehicles.

What records will transport service operators have to keep?

Some of the records to be kept include financial records and invoices relating to expenditure on fuel and maintenance, invoices relating to cartage or use of the RUC vehicle, records indicating which vehicles carried particular loads, and waybills and manifests.

This requirement will not apply to private and trade vehicles.

How long will transport service operators have to keep records?

Logbooks will now need to be kept for 3 years after the date of the last entry. All other records that demonstrate compliance with the RUC Act will need to be kept for 7 years from the date of last entry.

Who will be able to access these records?

If the NZTA believes there is unpaid RUC outstanding for a RUC vehicle, the NZTA may require an operator subject to RUC to produce for inspection any records in the operator’s possession that relate to the use and maintenance of a RUC vehicle.

The NZTA can then make copies of any records should it wish to do so.

What are the penalties for failure to keep records?

Anyone who fails to keep records as required in the Bill will be deemed to have committed an offence and may be liable on conviction to a fine. In the case of an individual, this fine may be up to $25,000 and up to $100,000 in the case of a body corporate.

Who else can the NZTA approach to produce records?

If the NZTA is unable to obtain records from a vehicle operator, or obtains records that it believes are falsified, incomplete or insufficient to assess an operator’s RUC obligations, then the NZTA will have the power to approach and request records from third parties.

The third parties that can be approached include anyone who has serviced, maintained, supplied or contracted for the use of the RUC vehicle in question.

Assessment process

What is the new assessment process?

Under the current RUC system, when NZTA investigations indicate RUC has been underpaid, the NZTA investigators can apply under section 18A of the RUC Act for a District Court inquiry into the amount of RUC payable. This is a very time-consuming and costly process for all concerned and is not cost-effective.

This Bill will replace the District Court inquiry process with a new assessment system whereby the NZTA can issue binding assessments for unpaid RUC. This change will make the collection of underpaid RUC more straightforward and should result in a significant improvement in collecting underpaid RUC.

Who will conduct assessments?

The new process will empower the NZTA to conduct investigations and issue binding assessments. A binding assessment constitutes a debt due to the Crown. Failure to pay an assessment will result in additional financial penalties being accrued.

What information will the NZTA use to conduct these assessments?

The Bill sets out what information the NZTA will be able to take into account when deciding whether an operator owes RUC. This includes:

• any information provided voluntarily by the owner or operator of the RUC vehicle
• any information stored in the RUC vehicle’s engine management system
• any distance recorder information recorded by a vehicle inspector during a Certificate of Fitness or a Warrant of Fitness inspection
• any distance recorder information provided by an enforcement officer
• any information provided during an inspection of records
• any information already held by the NZTA in relation to the RUC vehicle

Can I appeal against an assessment if I don’t agree with it?

Yes. The issuing of binding assessments is a significant power, therefore the Bill contains checks and balances including review and appeal rights.

Once an assessment has been issued, the person who receives the assessment will be able to request that the assessment be reviewed by an independent third party.

If they disagree with the outcome of this third party’s review, they can then take the matter through the court system should they wish to do so.

Background information

What are road user charges (RUC)?

Road user charges (RUC) are taxes paid by all diesel powered vehicles and all vehicles over 3.5 tonnes.

Taxes paid by road users are the main source of funding for developing and maintaining New Zealand’s land transport network.

Drivers of petrol, LPG or CNG powered vehicles meet most of their share of the cost through fuel excise duty (FED), which is included in the price of the fuel. There is no excise duty on diesel.

What is the money from RUC spent on?

All transport taxes, including RUC, are collected into the National Land Transport Fund, along with the land transport component of the annual licence fee.

The money in the fund is spent across the following activities:

• new and improved State highways
• renewal and maintenance of State highways
• local road construction, renewal and maintenance
• road policing
• public transport
• planning and administration
• other activities including improvements in walking and cycling facilities, improvements to crossing and parking facilities, and transport sector research

How do the changes relate to the recommendations of the RUC Review?

The changes give effect to the government’s decisions arising from the recommendations of the Independent Review of the New Zealand Road User Charging System.
Read the Minister’s media statement on review decisions

Why RUC rather than a diesel tax?

Changes to the RUC system follow on from the government’s RUC review which recommended improving the RUC system rather than moving to diesel taxes.

A diesel tax would mean that non-transport users (estimated to account for 36 percent of diesel sales) would be hit with much higher compliance costs and we’d still need a RUC type system to cover the extra road maintenance costs associated with heavy vehicles.

The government has instead opted to improve the current system which ties actual kilometres driven to the costs of road use.