The annual vehicle licensing fee currently is a very blunt instrument to collect ACC and National Land Transport Fund (NLTF) fees. Vehicle owners are required to pay the same fees (albeit for petrol vehicles some costs are collected with fuel) for each vehicle owned regardless of the distance travelled or the motorist’s safety record.
The current system is not well understood by the public and is considered to be unfair as evidenced by late payments and very high enforcement costs.
Vehicle licensing provide the greatest opportunity for reform to achieve goals of, fee collection, minimal enforcement and fairness for motorists.
In the Conversation paper, Vehicle Licensing Reform Opportunities dated May 2012 a number of questions were raised for answer relating to Annual Vehicle Licensing.
1. From your perspective (ie agent/customer/etc), what are your views on the annual vehicle licensing process?
2. Does the current system work for you, ie is it easy to use?
3. What could be done to make the vehicle licensing system and process simpler and easier to use, and encourage customers to comply?
4. How could the compliance and enforcement regimes be improved, eg what could be done to increase the number of people paying on time?
5. What penalties should apply for noncompliance?
6. Do you think the current infringement fine (up to $200) for not displaying a current and valid vehicle licence label is appropriate?
7. How important is it to maintain a high quality database, particularly for enforcement purposes and how could this be done?
These questions were considered by MTA and a number of suggestions were given consideration to meet the requirements implicit in these questions. Those outlined as follows have been widely supported by MTA members.
A. MTAs Option one MTA Recommendation
Include all licensing costs as an excise tax on fuel, including petrol, diesel, LPG and/ or as road user charges (RUC)
This is the option favoured by MTA members and many of the public we have spoken to. We believe it answers most of the issues implicit in the May conversation paper questions above. We suggest the licensing fee including ACC fees and National Land Transport Fund costs and other minor fees be included into the cost of fuel and road user charges (RUC)
The advantages:
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Removes all licensing transactions and the associated administration costs including the label. New agencies collecting fees might want to cover their additional costs. This is likely to be a considerable saving.•
Would be fairer for motorists as it would allow licensing costs to be spread across as many fuel stops as the motorist wanted.•
Would be fairer for motorists as the fee paid would be proportionate to the level of use the motorist made of the road.•
Would be fair to owners of multiple vehicles who would only pay fees for the vehicle being driven.•
As motorists need to refuel, and thereby pay their licence fee, it would virtually remove the need for enforcement, and the need for penalties or fines. The Justice Department work load would be significantly reduced.•
It would be relatively easy to adjust the fee collected to match ACC and National Land Transport fund needs.•
Tourists and non residents would pay by use of the vehicle not just the rental licence holder.Associated activities
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The price of fuel would need to rise around 20–25 cents a litre. Motorists who understand the benefits of this price rise have indicated their support for this suggestion. It is noted that the price of fuel in New Zealand is at the lower end of the international retail price level.•
With diesel vehicles MTA, consider the licensing fee should be added directly to the cost of diesel fuel. If necessary part of the fee could be added to Road User Charges.•
Vehicle owner details on the NZTA database could be updated at the time of a vehicle’s Warrant of Fitness or Certificate of Fitness inspection. WoF agencies would need to be given the tools to undertake this task. (TSDA’s already have facilities).•
Those vehicles with a proportionally higher ACC cost such as motorcycles could pay an additional fee. Motorcycle riders could be levied, with the Option of putting the licence on hold if they don’t currently own or ride a motorcycle. Alternatively WoF agencies could collect the fee at the time of the WoF. WoF agencies would need a simple means to collect and pay these fees.Disadvantages
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Those motorists with vehicles travelling long distances might be concerned. At the moment they benefit from the fact licensing costs do not vary in line with the level of road use.•
The fuel price rise would also affect boats, lawn mowers and other equipment used off road. MTA would note many accidents are associated with the use of this equipment. Those machines using petrol already pay some National Land Transport fund and ACC fees.•
Would reduce the income of city councils by reducing fines. B. MTAs Option twoMTA recommendation
Use insurers to collect the ACC portion of the Licence fee with vehicle insurance fees. The balance is to be collected in the price of fuel.
If a price rise of 20–25 cents per litre on petrol and other fuels was unacceptable the ACC portion of the licensing fee could be split out and included with the vehicle insurance cost when this was charged by insurers. Third party insurance could be mandated to ensure a levy is collected on all vehicles.
This would reduce the petrol price rise to 5 – 6 cents to cover the National Land Transport Fund and other minor fees.
The advantages
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Some advantage of MTAs Option one position would remain.•
The fuel price rise would be reduced to 5–6 cents to cover the National Land Transport Fund and other minor fees.•
The current licensing transaction and associated costs would be removed albeit Insurers would want to cover their costs.•
The no claim bonus applied by insurers to vehicle insurance could also be applied to ACC fees. This could be seen as fairer by motorists who do not have accidents as their share of the ACC cost could be reduced.•
The no claim bonus would act as a direct incentive to motorists not to have accidents as their ACC and vehicle insurance costs could reduce.•
All vehicle related insurance costs would be grouped Associated activities•
The price of fuel would need to rise 5-6 cents per litre.•
Third party insurance would need to be introduced as a mechanism to allow insurers to collect insurance.MTA recommendation
Mandatory third party insurance be introduced as a mechanism to allow the ACC fees to be collected by insurers. (This occurs in many other countries.)
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WoF Agencies could be required to check that third party insurance is held at the time a Warrant of Fitness check is undertaken.•
Insurers or WoF Agents could update owner detail on the NZTA database. The disadvantages•
A level of non compliance is likely to continue as the cost to pay both vehicle insurance and ACC fees might be high, particularly for those with a poor accident record. Insurers will have a progressive payment options available which would minimise this resistance.•
This system would be more complex and would not deliver the same level of benefit to motorists as MTA’s Option one of applying an excise tax on fuel.C. MTAs Option three MTA recommendation
An amalgamation of Options one and two be introduced where a portion of the ACC fee is collected in fuel and a portion by insurers. The National Land Transport Fund
component to be collected as an excise tax on fuel.
Under this Option some of the ACC fees would be paid within the fuel price and some directly to insurers. This would still keep the petrol price rise down to say 15 cents a litre, significantly less than required under Option one above, and the levy payable to insurers would also reducing compared to Option two.
The advantages
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The fuel price rise would be reduced compared to Option one to approximately 15 cents a litre.•
The ACC levy that would be payable to insurers would be reduced making this more affordable.•
A portion of the advantages in Option one and Option two above would be retained so owners have a vehicle use and risk factor built into their ACC fee.•
Would reduce the incentive for non compliance in Option two through non payment of insurance fees.Associated activities
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The price of fuel would need to rise by about 15c a litre•
Third party insurance would need to be introduced as a mechanism to allow insurers to collect insurance.MTA recommendation
Mandatory third party insurance be introduced as a mechanism to allow the ACC fees to be collected by insurers. (This occurs in many other countries.)
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WoF Agencies could be required to check that third party insurance is held at the time a WoF check is undertaken.•
Insurers or WoF Agents could update owner detail on the NZTA database. The disadvantages•
A level of non compliance is likely to continue as the cost to pay both vehicle insurance and ACC fees might be high, particularly for those with a poor accident record. Insurers will have a progressive payment Options available which would minimise this resistance. The risk would be less than in Option two•
This system would be complex•
Motorists that travelled long distance might still see some disadvantage but this would be reduced compared to Option one•
The fuel price rise would also affect boats, lawn mowers and other equipment used off road. MTA would note many accidents are associated with the use of this equipment. Those machines using petrol already pay some National Land Transport fund and ACC fees. this would be reduced compared to Option oneD. Merge the Vehicle Licence with the Warrant of Fitness
MTA had also considered merging the Annual Vehicle Licence with the Warrant of Fitness. While this would have reduced the total number of transactions, the cost of the Vehicle Licence, WoF and any necessary repairs in one amount could prove a significant hurdle for many motorists and households. It would not be possible to develop a progressive payment Option as some of these costs are not known until the day of the WoF inspection. The effect of bringing costs together in a significantly increased bill at one point is likely to increase non-compliance. MTA does not support combining WoF and Annual Vehicle Licensing.