The Press FRIDAY, JULY 23,1971. The petrol tax

Press, Volume CXI, Issue 32666, 23 July 1971, Page 12

The Press FRIDAY, JULY 23,1971. The petrol tax

To judge from the returns to the end of February, local bodies will not be disappointed in their expectations of a $l6 million annual revenue from petrol tax. From February to the end of May more than $4.6 million was collected; but at the start of that period only 16 of the 21 petrol-tax areas were collecting the tax. Taking the figures for the three months, March to May, as a quarter, an annual revenue of $15.1 million is indicated. This figure, however, may be conservative, as petrol consumption in December and January is normally higher than in other months.

Petrol consumption in the five months ended May this year showed an increase of 4.3 per cent on consumption in the same period of 1970. For the greater part of the later period the maximum permissible tax—3 cents a gallon—was in force throughout the country. By the end of the period a further increase of 2 cents a gallon in the retail price was required to meet higher costs of crude oil from the Middle East and to restore distributive margins in New Zealand. The price of premium grade petrol, 48c a gallon, is now 9c a gallon higher than it was 12 months ago.

But the territorial local bodies which now benefit from the petrol tax will need to keep a weather eye on their receipts from tips source, and on developments in the economy which are likely to affect petrol consumption. Although the new tax provides a welcome relief to ratepayers, it is subject to more variations than the annual rate revenue. So far there need be no cause for misgiving among local body officers who have budgeted this year’s expenditure rather closely, for petrol consumption is running at a very high level. ‘The 4.3 per cent increase in the five months ended May was achieved in spite of an increase of some 15 per cent in the price of petrol in the intervening 12 months. Although these figures suggest that petrol consumption is very unresponsive to changes in price, the figures are by no means conclusive. Prices of most other commodities, rose, too, in the same period. The consumer price index showed a rise of about 10.5 per cent, so that, relative to other prices, petrol rose only about 4 per cent Furthermore, motorists' incomes rose, on average, more than prices: disposable private income, after tax, is estimated to have risen 12.5 per cent in the year ended March 31, 1971; and the consumption of petrol by business firms —perhaps half the total —is much less responsive to changes in price than is private motoring. Business firms’ usage of petrol is very responsive to changes in economic activity. Published statistics do not distinguish between business and private consumption of petrol, so that trends in these separate markets for petrol cannot be discerned. But in 1958, when both business activity and personal consumption were reduced, petrol imports fell 6 per cent While there are no indications of an impending recession comparable with the downturn in 1958, there is some evidence of a decline in business activity and in personal consumption. Even allowing for the extra business mileage in December and the extra private motoring in December and January, the local bodies might not collect much more than $l5 million in petrol tax in 1971-72.