Road User Charges Bill Report of the Ministry of Transport

Transcription

1 Road User Charges Bill 2010 Report of the Ministry of Transport May 2011

2 Contents Glossary 3 Part A List of Submitters 4 Page Part B Significant Policy Issues 5 Topic A RUC weight based on gross weights 6 Topic B Clause 12: Additional RUC licences 23 Topic C The impact of technology on the RUC system 28 Topic D Recordkeeping and assessment provisions in the Bill 33 Topic E Penalties 37 Topic F Costs under RUC system 44 Topic G RUC for light vehicles (vehicles 3.5 tonnes or less) 46 Topic H Other issues 51 Issues outside scope of the Bill 60 Part C Clause by clause analysis 62 Part D Appendices 177 Appendix 1 Consultation on the Bill Appendix 2 Charging for road use internationally Appendix 3 Diesel tax: refund and collection issue Appendix 4 Table of Select Committee requests Appendix 5 Table of potential impacts of changes to the definition of RUC weight on operators by band Page 2 of 189

3 Glossary Note that this document has been prepared by Ministry of Transport officials. As such, the document refers to we, the Ministry and officials interchangeably. Where the New Zealand Transport Agency (NZTA) has provided specific comments, these are attributed to the NZTA. Chief Executive CAM Exempted vehicle FED Gross laden weight Gross weight Heavy vehicle Light vehicle NZTA The Review Road user charges (RUC) Supplementary licence Time licence Unladen or tare weight VDAM Rule The Chief Executive of the Ministry of Transport. The Cost Allocation Model. A spreadsheet model that is used to inform the setting of RUC rates by allocating government spending on land transport to the various categories of vehicle. A vehicle exempt from the RUC system, usually because it is of a type that makes minimal use of public roads. Examples include farmer s tractors and forklifts. Electric vehicles are also exempted from RUC at present. Fuel Excise Duty. In relation to a motor vehicle, this is the weight specified by the manufacturer as the maximum weight the vehicle can be loaded to. The actual weight of a vehicle transmitted to the road surface through the axles of the vehicle. Common term used to describe vehicles of 3.5 tonnes gross laden weight or more. These vehicles are required to have a hubodometer fitted. Common term used to describe vehicles of 3.5 tonnes gross laden weight or less. The New Zealand Transport Agency. The Independent Review of the Road User Charges System. The Review Group was established in August 2008 to conduct an independent review of the New Zealand road user charges system. The Review Group presented a report to the Minister of Transport in March The cost of using New Zealand s roads is recovered from road users via levies in the price of some fuels or through RUC. All diesel powered vehicles and other vehicles powered by a fuel not taxed at source, regardless of weight, must pay RUC, unless specifically exempted. Vehicles with a manufacturer s gross laden weight of more than 3.5 tonnes (3500kg) must also pay RUC, regardless of fuel type. A licence bought in conjunction with a distance licence that increases the allowable weight a vehicle can carry. These are issued under the RUC Act 1977 in units of 50km. A licence issued for off road vehicles listed in schedule 2 of the Act. The licence specifies: the vehicle type the maximum gross weight to be carried under the licence the start date and finish date. These are issued under the RUC Act 1977 for periods of at least one month. The weight of the vehicle together with its fuel system and accessory systems necessary for the vehicle s operation. This excludes any additional weight that it carries (people and/or loads). The Land Transport Rule: Vehicle Dimensions and Mass 2002 specifies requirements for dimension and mass limits for vehicles operating on New Zealand roads. Page 3 of 189

4 Part A List of Submitters Abbreviation of names Some submitters names are abbreviated in the body of the report. The words appearing in brackets in the Name column shows the abbreviation used. Name AJ & SG Bishop Partnership (AJ & SG Bishop) Arel Earthworks BMW Group New Zealand (BMW) Brendan K Cropp Bus and Coach Association (BCA) Chapman Group Crane Association of New Zealand Inc. (Crane Association) Devan Devaroyan Duncan Cairncross Dynes Group EROAD Federated Farmers of New Zealand (Federated Farmers) Fonterra Co operative Limited (Fonterra) Hermansen Transport Limited (Hermansen Transport) Honda New Zealand (Honda) Institution of Professional Engineers New Zealand (IPENZ) Inter Freight Limited (Inter Freight) Knight Train Haulage Limited (Knight Train Haulage) McLean Road Services Limited (McLean Road Services) Motor Industry Association (MIA) Motor Trade Association (MTA) New Zealand Automobile Association (AA) New Zealand Federation of Motoring Clubs (FOMC) New Zealand Forest Owners Association (FOA) New Zealand Heavy Haulage Association (HHA) New Zealand Motor Caravan Association (Motor Caravan Association) North Canterbury Distributors Limited (North Canterbury Distributors) R E Johnson Limited (R E Johnson) Road Transport Forum New Zealand (RTF) Roading New Zealand (Roading NZ) Rotorua Forest Haulage (RFH) RCNZ New Zealand (RCNZ) Southern Trucking Limited (Southern Trucking) Toll New Zealand (Toll NZ) Tony Milham & Vanessa Milham, A One Movers Ltd (A One Movers) TR Group Transcon Warkworth Limited (Transcon Warkworth) Transport Investments Wightman Contractors William Abraham Page 4 of 189

5 Part B Significant Policy Issues This section of the report addresses those significant policy issues raised in submissions or by the Select Committee that are most usefully discussed separate from a clause by clause analysis. Part B covers the following significant policy issues: Topic A RUC weight based on gross weights Topic B Clause 12: Additional RUC licences Topic C The impact of technology on the RUC system Topic D Recordkeeping and assessment provisions in the Bill Topic E Penalties Topic F Costs under RUC system Topic G RUC for light vehicles (vehicles 3.5 tonnes or less) Topic H Other issues Issues outside scope of the Bill Page 5 of 189

6 Topic A RUC weight based on gross weights Background 1. Many of the submissions on the Bill commented on the move from operator nominated weights under the current RUC system to fixed RUC weights based on maximum permissible on road weight. 2. The Independent Review of the Road User Charges System (the Review) recommended that the definition of vehicle weight for the purpose of RUC licences be changed from actual gross weight, as nominated by vehicle operators, to a definition based on maximum permissible on road weight. Status quo operated nominated weights 3. The Road User Charges Act 1977 defines weight, for the purpose of RUC licences, as the actual weight transmitted to the road surface through a vehicle s wheels. This requires vehicle operators to estimate what the maximum gross weight of their vehicle will be over the distance covered by the licence purchased If operators find that they need to carry a higher weight than their current licence allows for a specific journey, they can purchase supplementary licences for the distance involved, in multiples of 50 kilometres. The Road User Charges Bill The change to the definition of weight for RUC purposes recommended by the Review is contained in clause 5. The proposed definition of RUC weight is that the RUC weight of a vehicle is equivalent to the usual maximum permissible on road weight of a vehicle under the Land Transport Act Clause 11 of the Bill requires the NZTA to assign a RUC weight to every vehicle required to pay RUC. This weight, in combination with the vehicle type, determines how much RUC should be paid for a vehicle. 7. Shifting to a system in which operators no longer nominate the weight of vehicles is intended to: eliminate scope for error or fraud in licence purchases reduce complexity of administration reduce compliance costs simplify enforcement remove the necessity for supplementary licences in their present form provide an incentive to make efficient use of heavy vehicles. 1 Standard distance licences are sold in multiples of 1,000 kilometres. Page 6 of 189

7 8. This new definition of RUC weight will result in operators being charged on the basis of their vehicles carrying capacities, rather than the actual loads they carry. Based on an average weight, all vehicles of a given type and RUC weight band will usually pay the same amount per kilometre. The exception will be vehicles subject to an overweight permit under the Land Transport Rule: Vehicle Dimensions and Mass Rule (VDAM Rule), in which case an additional RUC payment will be required. 9. For most vehicles, but not all, the new RUC weight will be higher than the weight specified in vehicles current RUC licences. This is because under the new RUC weight definition the average weight will be higher than the average current licence weight for each vehicle type. 10. Given a requirement to raise the same total revenue under the new system as under the existing system, the average amount that vehicle operators pay for RUC licences will remain the same. This means that the price of a licence for a given nominal weight will reduce. 11. This reflects that it will no longer be possible for operators to buy licences for lower than maximum weights when less than fully laden. However, it is important to note that even under the current system operators have only limited opportunities to vary the weight of their RUC licences. 12. This is because the current system requires operators to carry a RUC licence that covers the maximum amount that a vehicle will weigh at any point on a journey. Supplementary licences, issued in 50 kilometre increments, allow some flexibility for operators to increase the normal licence weight of their vehicles when carrying loads heavier than usual, These licences are charged for at a higher per kilometre rate than standard 1,000 kilometre distance licences, and this, together with the additional transaction costs involved, means that most operators in fact carry the same value of RUC licence on their vehicles at all times. 13. Many operators at present carry RUC licences for the maximum allowable weight of their vehicles, even though the actual weight will usually be less. Only operators who never or rarely need to use the maximum weight capacity of their vehicles are able to take full advantage of the operator nominated weights system. 14. Under the new system, some operators will pay lower charges than at present, and some will pay higher charges. Operators who, due to the nature of the loads they typically carry, currently purchase RUC licences at lower weights than the average purchased for vehicles of similar type and maximum weight are likely to face higher charges under the RUC weight system. Conversely, operators who currently purchase licences at weights greater than the average for vehicles of similar type and maximum weight will face lower charges than they pay under the current system. 15. The proportions of vehicles for which charges increase or decrease, and the size of the differences in charges under the new system, will depend on the definition of weight bands and vehicle types. The Bill provides that these definitions will be contained in regulations to be made after the Bill Page 7 of 189

8 is enacted. For illustrative purposes we have provided an example of the possible impacts on vehicle charges based on a scenario applying relatively wide weight bands to the existing vehicle types. This is set out in Appendix 5. Summary of submissions 16. Set out below is a summary of the submissions relating to the definition of RUC weight in the Bill. A full list of these submissions (sorted by issue) is included in Subpart 1 at the end of this topic. 17. While a number of submitters support the new definition of RUC weight, the majority of submitters oppose the new definition. 18. Submitters who oppose the new definition gave various reasons for their opposition. Some prefer to retain the existing system of operator nominated weights rather than move to a system based on maximum permissible weight. Others want to see further work carried out on what the impacts are likely to be before the new definition of weight is implemented. 19. Many submitters are opposed to the new definition, as they believe it will increase operating costs for vehicles that they operate. 20. A number say the proposed definition will disadvantage operators in certain industries (for example, those involved in primary production). 21. Others consider they will be disadvantaged by the new system due to the type of loads they carry (for example, operators who carry very light loads). 22. Some submitters express concern that the change will result in certain vehicle types being less cost effective for the tasks the vehicles are currently being used for. The effect of this could be that such vehicle types become less valuable and operators will be unable to resell them. 23. A number of submitters express concern that the new weight definition may lead operators to switch to using vehicles that are less optimal from a safety point of view. 24. Some submitters contend that the change will have a negative effect on the efficiency of the fleet, and on environmental outcomes as a result. 25. One of the most common concerns of submitters is the fact that they are unable to see what impact the change in weight definition will have on the cost of the RUC that they purchase. 26. A number of submitters request that vehicles of the type they use be given a reduced RUC rate under regulations compared to other vehicles at present falling within the same vehicle type. The most common reason for requesting a reduced rate for certain vehicles within the same vehicle type is that those vehicles will be charged in excess of the costs they are generating. Page 8 of 189

9 Retaining operator nominated weights/delaying introduction of RUC weight definition 27. A number of submitters are generally opposed to the principle of charging on the basis of maximum permissible vehicle weight. Others asked for further consultation, or study of the potential impacts, before of the new definition of RUC weight in the Bill is implemented. 28. We do not consider, that further consultation and work would lead to a greater degree of consensus around the proposal, or increase the level of knowledge about likely impacts of a change in definition. The Review heard extensive submissions and commissioned independent expert advice before recommending RUC charges be based on a vehicle s maximum permissible on road weight. In turn, there was further consultation with organisations representing the road transport industry before proposals were agreed to by Cabinet. A summary of this consultation process is covered in Appendix It is acknowledged that the proposed definition will result in a different distribution of RUC costs compared to the current system. Given that the change in weight definition is intended to be fiscally neutral, it is likely that any cost benefit analysis undertaken would find that, leaving aside savings in administration and compliance costs, the costs and benefits would cancel out. 30. Analysis undertaken for the Review indicated that there are likely to be significant benefits from the proposal in terms of administrative, compliance, and enforcement costs. In addition, operators who are compliant at present will no longer meet the cost of weight related evasion. 31. EROAD and A One Movers are generally supportive of the Bill, except for the change in weight definition. The compliance parts of the Bill are, however, designed on the assumption that in future it will not usually be necessary to weigh vehicles in order to determine whether they are carrying the correct RUC licence. Thus the proposed definition of RUC weight can not readily be separated from other parts of the Bill. 32. The HHA submits that the current system is the most efficient method of recovering costs of road use in relation to overweight vehicles. Clause 12 of the Bill provides that such vehicles will be required to carry additional RUC licences. It is intended that additional charges will be set in a way that continues to charge operators as closely as possible for the weights they are actually carrying. 33. As noted in submissions the current system does not allocate costs precisely. The new legislative framework is expected to provide greater flexibility to address some of the issues involved. This may include allowing for RUC for vehicles carrying very large loads to be purchased for distances that align more precisely with journey lengths. Page 9 of 189

10 The change in weight definition will increase operating costs 34. We note that some submissions appear to assume that the change in definition will mean that all vehicles will be charged at the rates now applying to fully loaded vehicles of their type. This is incorrect, as the change to the new charging system is intended to be revenue neutral. 35. As previously noted, Appendix 5 provides an illustration of the potential effects of the new definition of RUC weight on charges payable for heavy vehicles. As shown, the effects will vary depending on vehicle type and weight, but in general charges for relatively heavy vehicles are more likely to decline rather than increase. 36. Operators who currently purchase RUC licences for weights significantly below the average for the weight bands in which their vehicles sit will pay substantially more to buy RUC for the same vehicles in future. This reflects the extremely large variation in charges for different weights under the current RUC scale. 37. EROAD and A One Movers submit that up to 80 percent of operators will pay substantially more as a result of the change, and that those worst affected will be mainly smaller companies. The Ministry has been unable to determine how they have reached this conclusion, but it appears to assume that smaller transport firms generally carry lighter than average loads relative to the carrying capacity of their vehicles. 38. The road transport industry includes large numbers of small businesses and some of the larger transport operations are comprised of a large number of individual owner operators under contract. 2 Small operators do not necessarily carry lighter loads than large operators. Many small operators should benefit from the change, both in terms of reduced charges to carry their usual loads and reduced compliance costs. Some large operators may pay higher charges on average, due to the nature of their business, or not benefit to the same extent from reduced compliance costs, due to the way their businesses are run. 39. We note that the new charges for the vehicles used in the examples given by EROAD and A One Movers will still be considerably less than the amounts of RUC paid for similar vehicles with above average loads under the current system. In other words, the effect is simply to move the charges paid by some operators to the same level as the average paid for vehicles of similar carrying capacity at present. 40. In some cases it is likely that operators will have to pass increased RUC costs through to customers, as suggested by Knight Train Haulage. However, the impact on total costs should be mitigated by the fact that RUC is only one component of total operating costs. Research carried out by Waikato University in 2006 indicated that RUC made up about 8 percent of the total cost of moving freight by road. There was some 2 The large courier fleets are generally comprised of owner/operators. Another example is Mainfreight. Page 10 of 189

11 variation across different industry sectors, with RUC being over 9 percent of costs for rural and inter city freight, but as little as 4 percent for urban deliveries. In 2006 fuel made up a larger proportion of costs than RUC (13 percent). Since then fuel costs have increased more than RUC. 41. The majority of road transport operators costs are made up of capital depreciation, other fixed overheads, and payroll. 42. As indicated by some submitters, the new approach to RUC weight definition may result in some operators changing the types of vehicles they operate. This is not an unexpected or unintended consequence of the policy. The Review received advice that the current New Zealand RUC system incentivises operators to add additional axles to vehicles. This results in the New Zealand heavy vehicle fleet being configured quite differently from fleets in other countries. For example, the 4 axle trucks and prime movers that are common on New Zealand roads are relatively rare in most other countries. 43. This configuration of the fleet adds to the cost of road transport in several ways: a. there is additional capital expense to buy trucks and trailers with extra axles or in some cases to modify vehicles after purchase by having additional axles fitted b. additional axles add to the unladen weight of vehicles, thus reducing the proportion of the vehicle s permissible weight that is available for payload c. the additional unladen weight and rolling resistance of extra tyres and axles increases fuel consumption. 44. In theory, the extra costs that operators incur buying and operating vehicles with additional axles are offset by reduced road wear. Spreading loads over more axles will undoubtedly have benefits of this nature. There is no way, however, of being sure that the savings in road wear are sufficient to justify the extra vehicle operating costs and increased number of journeys required to transport the same tonnages. 45. The FOMC also calculates that certain motorhomes built on commercial chassis will have their costs increase by around 400 percent. These figures have been calculated using today s RUC rates. As discussed above, the actual rates will vary for vehicles types under the new RUC system; therefore these calculations have no relevance to calculations under the new system. While the costs of RUC for these vehicles may increase under the new system, the increases will not be to the extent indicated in the FOMC submission. Charging on maximum on road weight basis not suitable for certain industries 46. Some submitters object to the new approach to weight definition on the grounds that this will result in operators paying for full loads while running empty. They maintain that this disadvantages operators who, due to the nature of the industry sector they work in, have no opportunities to Page 11 of 189

12 carry backloads. One submitter suggests that this may apply particularly to operators working in the agricultural sector. 47. This situation already exists under the current RUC system, as operators must purchase licences sufficient to cover the maximum gross weights of their vehicles at any point over the distance the licence applies to. Standard distance licences are sold in multiples of 1,000 kilometres and the price of these licences is set using assumed standard load factors of 55 percent for powered vehicles and 45 percent for trailers. 48. Lack of opportunity to backload is common to many sectors of the transport industry and it is doubtful that the agricultural sector is particularly disadvantaged. The load factors used to calculate existing charges assume that backloads are the exception rather than the rule. This will continue to be the assumption under the new system. 49. The current system does provide for the possibility of running at a minimal RUC licence weight most of the time, and purchasing supplementary licences (in multiples of 50 kilometres) to cover any trips involving heavy loads. However, as the per kilometre rate for a supplementary licence is set assuming the vehicle is fully laden, it is substantially higher than the standard distance licence rate. For this reason, and because of the extra transaction costs involved, most operators do not vary the RUC licence weights for their vehicles to any significant extent. 50. Bearing in mind that charges for maximum weight vehicles will reduce under the new scheme, operators who at present load to maximum weights on one leg of their journey and return unladen may in fact end up paying less under the new system than under the present one. Charging on maximum weight capacity will disadvantage those that carry light/bulky loads 51. As noted above, the change will increase costs for operators who specialise in light and bulky loads, although the cost increment would apply equally to any operators competing for the same loads. 52. An exception to this may be where operators who normally carry heavy loads take the opportunity to carry a light load as a backload. It is not clear why this would occur more often under the new system than at present, given that an operator able to take a backload already enjoys a considerable competitive advantage under the existing system, through being able to price at marginal cost. 53. Finally, some submitters may be over estimating the effect of the change on charges for particular vehicles. The change in weight definition will reduce resale value of certain vehicles 54. The possibility of adverse effects on truck values will be explored in the process of consulting on the regulations for setting charges under the new system. Page 12 of 189

13 55. As noted above, the change is expected to reduce the incentive to add additional axles to vehicles. The size of this effect may, however, be overestimated by some submitters. For example, in the case of type six (3 axle) trucks, RUC costs for most vehicles will either reduce or increase only to a small extent. Operators who use such trucks for relatively light loads may find it advantageous to switch to 2 axle vehicles, these have a much smaller maximum weight limit and some operators will wish to retain the flexibility to carry heavier loads. Current RUC licence purchases indicate that only about 6 percent of 3 axle trucks run at licence weights that could be within the maximum weight permitted for 2 axle vehicles. 56. The Ministry estimates, of the effect of the new system on maximum load combination vehicles indicated, although the advantage that the present system gives to 8 axle combinations is likely to reduce, it will not be eliminated. A 7 axle combination vehicle will still pay more in RUC than an 8 axle combination when loaded to 44 tonnes. The 7 axle vehicle will be able to carry a slightly larger payload due to its lower unladen weight, and will likely cost less to buy and maintain. This may lead to operators supplanting 8 axle combinations with 7 axles when vehicles are replaced. That said, it is unlikely that 8 axle combinations will become uncompetitive overnight. 57. It is also possible that while a vehicle may no longer be optimal in terms of RUC for one task it may still be competitive in another role. For example, although there may no longer be a strong incentive to use 8 axle combinations to carry 44 tonne loads, these combinations are likely to retain an advantage in carrying heavier (overweight) loads. Limits on individual axle loadings restrict the use of 7 axle vehicles for overweight loads. The new RUC weight system could compromise environmental and safety outcomes 58. There is evidence to suggest that the current RUC weight definition may already be compromising environmental and safety outcomes, and that the new definition would have a positive effect. An independent report provided to the NZTA [The Impact of RUCs on Heavy Vehicle Configuration Choice and its Effects, TERNZ 2008] concluded that there would be safety and emissions benefits from reducing the numbers of axles on maximum weight combination vehicles. 59. These environmental and safety benefits derive from the reduction in the unladen weight of vehicles. Enabling operators to carry a heavier payload within the same maximum weight limit reduces the number of vehicle journeys required to carry the same total freight tonnage as under the existing RUC system. 60. Reduced vehicle kilometres would also have environmental benefits; reduced unladen weights would reduce fuel consumption per kilometre. 61. The report found that, at the individual vehicle level, it was difficult to identify any differences in safety performance between 7 and 8 axle combinations. Page 13 of 189

14 Potential Impact on Other Transport Modes 62. The AA, while generally supportive of the change in weight definition, expresses concern regarding the potential effect that reduction in per tonne trucking costs may have on other freight transport modes. 63. Any reduction in per tonne costs will be limited by the intent to maintain revenue neutrality. It is expected that there will be an overall net improvement in road freight efficiency, but we do not consider it likely that any change would be of a magnitude sufficient to alter the competitive position of rail or sea freight relative to road transport. 64. Rail and sea freight have a significant per tonne kilometre cost advantage over road transport, especially for bulk freight, this advantage is likely to increase with increasing fuel costs. Road transport is usually chosen over rail or sea for reasons other than per tonne kilometre cost. Need to see indicative RUC rates/weight bands under new system 65. The government has stated its intention to carry out further consultation with transport industry stakeholders prior to implementation of the new RUC system. The exact level of new charges for specific vehicle types will depend, in part, on the outcome of that consultation. 66. Refer to comments in the consultation section (Topic H) and to Appendix 1 for details of the consultation undertaken to date on this topic. Requests for exemption/special rates for specific types of vehicle 67. The regulation making powers, under clauses 79 and 81, allow for flexibility for different types of vehicles to be catered for under the regulations. We do not recommend defining vehicle types in the Bill itself. 68. The BCA submits that its support for the new definition of RUC weight is subject to a special charging category being created for buses and coaches, as distinct from freight carrying vehicles with a similar chassis configuration. This position has been noted by the government. 69. Analysis carried out by the Ministry indicates that there is a case for differential treatment of buses compared to freight vehicles. We therefore anticipate recommending that there be a separate RUC class for buses and coaches in the regulations. If any such differential is created, the aim would be to ensure that buses and coaches, as a class, are not disadvantaged by the change in weight definition. 70. A similar analysis was also carried out to determine whether motor caravans, as a class, would be likely to be disadvantaged by the change in weight definition compared to goods service vehicles of similar weights. This analysis did not support the Motor Caravan Association s submission that the change in weight definition will have a disproportionate impact on their members as a group. A small number of larger motor caravans may be disadvantaged and further analysis will be Page 14 of 189

15 undertaken to determine whether it is appropriate and feasible to provide special consideration for this group. 71. We have not formed a view as to whether all terrain cranes should have a special class. The issue relating to all terrain cranes also exists under the current system. Consideration of the approach to all terrain cranes will take into account the position of other vehicles that do not carry payloads. 72. We recommend that the Committee note that: (a) the proposed change in weight definition is not easily separable from the other provisions of the Bill, as it is assumed that in general, actual vehicle weight will not determine the amount of RUC payable (b) we believe a case exists for having a separate RUC class for buses and coaches (c) we have not yet formed a view as to whether all terrain cranes should have a special class. Page 15 of 189

16 Subpart 1 Supportive of new definition of RUC weight 73. The AA supports the change from operator nominated weights to a fixed RUC weight based on maximum permissible on road weight. According to its submission this move reduces per tonne trucking costs and increases the incentives to operate trucks fully laden, which is more efficient. The AA do have a concern that this may encourage a shift from rail and sea freight to road transport. 74. IPENZ is generally supportive of the new definition of RUC weight. 75. The BCA s support of the Bill s proposed approach to RUC weight is contingent on the creation of regulations that create a separate charging category for buses and coaches. 76. The MTA is supportive of the new definition of RUC weight. 77. While not explicitly expressing an opinion on the new RUC weight definition, the RTF submission notes that the move could potentially reduce administration and compliance costs. Supports retention of operator nominated weights 78. AJ & SG Bishop, Brendan K Crop, and Knight Train Haulage all support retention of the current system of operator nominated weights for determining RUC charges. 79. The HHA submits that the existing system is the most efficient way of apportioning the costs to the roading network that overweight vehicles generate. 80. EROAD submits that the new RUC weight definition should be removed from the Bill, and replaced with the existing provisions for operator nominated weights, until such time as a comprehensive consultation process and benefit/cost analysis has been undertaken. 81. The FOMC submits that the removal of operator nominated weights is against the principle of user pays and that the benefits of the change will accrue mainly to large commercial operators. Request that the introduction of the new weight definition be delayed 82. A One Movers believes that due to the lack of analysis of the potential impacts, the new RUC weight definition should be removed from the Bill, or alternatively, additional time should be given for consultation on the new RUC weight definition. A One Movers submit that this proposal will result in more damage to roads as it will reward vehicles with fewer axles. 83. EROAD believes the change in weight definition will result in a significant deterioration in equity, with operators who carry lighter loads subsidising those who carry the heaviest loads. In addition, its submission states that Page 16 of 189

17 Unsustainable increases in RUC charges could trigger business failures, and uncertainty will delay investment, and damage the local truck and trailer industry. Change in weight definition will increase operating costs 84. AJ & SG Bishop opposes the new definition for RUC weight as it estimates it will increase the cost of operating its Type 6 truck by around 60 percent. 85. Arel Earthworks submits that purchasing RUC based on the maximum permissible weights for its vehicles will be very expensive. 86. Brendan K Cropp opposes the new definition of RUC weight as it will increase his business operating costs, making his business less competitive against larger companies. 87. Knight Train Haulage submits that the change in weight definition will result in significant impacts on its bottom line which it will be forced to pass on to their customers. 88. North Canterbury Distributors report it already struggles with compliance costs, will be unable to pass the increased costs of RUC on to customers, and will therefore be forced out of business. 89. Southern Trucking submits that the increase in operating costs associated with charging on maximum permissible weight will mean its business will no longer be viable. 90. Wightman Contractors made a general comment about the change in weight definition being unfair for many operators. 91. Devan Devaroyan believes that these changes will result in an increase in costs for both operators and consumers and believes it is absurd to charge a vehicle the same when it is carrying 30 tonnes as when it is running near empty. 92. Inter Freight reports that the changes to the definition of RUC weight will have a significant and detrimental economic impact on its business. 93. EROAD submits a majority of RUC vehicles, around 70% 80% of all operators, will be required to pay substantially more in RUC, ranging from 20% to 100%, when compared with their existing charges. 94. A One Movers submits that a move to gross weights will result in higher charges for most of the industry (80 percent) and will be a particular disadvantage for smaller companies. Page 17 of 189

18 Fixed RUC weights are not suitable for certain industry types 95. Brendan K Cropp opposes the new definition for RUC weights as it will severely affect smaller businesses ability to use a single vehicle for a variety of purposes. 96. The Chapman Group is involved in primary production (commercial growing) and the nature of its business sees its vehicles running empty half of the time. The Chapman Group believes it will be disadvantaged under the new RUC weight system as it will have to pay for full loading of the vehicle for 100 percent of the time. 97. The HHA is concerned that the proposed approach is insufficiently flexible for the heavy haulage industry and submits that it should be possible for RUC for heavy haulage vehicles to correspond precisely to actual loads carried. 98. The Motor Caravan Association is opposed to the change in weight definition as motor homes are never likely to operate at near the maximum permitted laden mass. This will result in some excessive increases in costs to the owners of private motor homes. 99. Federated Farmers expresses concern that vehicles involved with agriculture have no ability to backload and as a result, vehicles that can carry a full load in both directions will benefit from the change at the expense of the agricultural sector. RCNZ expressed similar concerns The FOMC believes the Bill could be construed as anti competitive as many smaller operators will have to pay for the maximum that their vehicle is capable of carrying despite never being loaded to this weight. Charging on maximum permissible weight will disadvantage those that carry light and/or bulky loads 101. Hermansen Transport is opposed to the new definition of RUC weight as it will disadvantage operators carrying lighter loads Knight Train Haulage runs B trains that are configured to carry up to 44 tonnes, but they rarely carry this weight due to the nature of its business. The new definition of RUC weight would be extremely counter productive for this firm North Canterbury Distributors submits that the loads of chilled and frozen goods it carries see its vehicles operating at well below maximum gross vehicle mass. According to North Canterbury Distributors submission, the increased costs of RUC would effectively make our business unprofitable Southern Trucking linehauls courier packages. Due to the light, bulky nature of their cargo their tractor units pay RUC for 14 tonnes or 15 tonnes at present. Under the proposed system, Southern Trucking contends that these vehicles would pay RUC for 26 tonnes (the unit s GVM). This means these units will no longer be viable for the job they are currently doing. Page 18 of 189

19 105. Inter Freight comments that the new definition of RUC weight in the Bill favours those who carry the maximum weights on the road. Inter Freight carry lightweight, bulky loads that use the full volume capacity of the vehicles and this would see it disadvantaged under the new system. Inter Freight also wants to see heavily loaded vehicles paying fair share for the damage they cause The FOMC expressed concern that the new definition of RUC weight will result in smaller operators and certain other operators (namely milk tankers, stock trucks etc.) subsidising the long haul heavy vehicle fleet. Gross weights will reduce resale value of certain vehicles 107. AJ & SG Bishop is concerned that the proposed changes will increase costs for its Type 6 truck and will result in such trucks having a lower resale value Hermansen Transport is concerned that the change will make obsolete many of the multi axle units in use at the present time Inter Freight is concerned that the changes will result in it having the wrong vehicle types for the work Inter Freight carries out A One Movers suggests that the change will increase the pressure on many businesses from banks and financiers and may result in some businesses going under. A One Movers also submits that the change will result in many operators being forced to re organise their fleets in order to maximise their efficiency under the new system TR Group is concerned that the proposed change in weight definition will alter the types of vehicles suitable for certain tasks. This may result in certain vehicles being worth considerably less as a result. To deal with this it recommends a transition period to allow operators to move from the old to the new system EROAD submits that a knock on effect of the new definition of RUC weights is that many operators will need to reconfigure their vehicle fleets to optimise performance. This will result in large numbers of existing vehicles having little or no resale value, with the potential that finance companies will be left carrying the burden. The new definition of weight could compromise environmental and safety outcomes and increase road damage 113. AJ & SG Bishop is concerned that the increased costs of operating a Type 6 vehicle at relatively low weights will make these vehicles less cost efficient, thereby making it difficult for smaller operators to sell these vehicles when the time comes. As a result the vehicle fleet will become older and less efficient with negative environmental impacts McLean Road Services submits that its loads (fibreglass swimming pools) are lightweight and have previously been towed legally by a utility vehicle. McLean Road Services has upgraded to a truck to improve Page 19 of 189

20 performance, as the utility vehicle often struggled with the loads, but the change in weight definition would see them return to using a utility vehicle. This could compromise efficiency and safety outcomes Inter Freight reports that the changes may result in it having to buy trucks solely for use when they need to carry heavier than usual loads. This will have the effect of increasing operating costs while decreasing efficiency A One Movers submits that the new definition of RUC weight will see operators switch to smaller vehicles, which will result in poorer environmental outcomes. In addition the change will cause New Zealand s trucking fleet to be less flexible and efficient A One Movers believes that the new weight definition will result in a fleet with more weight per axle and therefore more damage to roads A One Movers expresses concern that this change will incentivise modifications to vehicles to reduce weight and thereby have a negative impact on safety outcomes EROAD is concerned that the proposed changes will result in operators running vehicles with fewer axles in order to reduce costs. This has the potential to increase the damage done to the road surface by individual vehicles EROAD also expresses concerns that the change will encourage a move to lighter vehicles with fewer axles, thereby reducing safety. Need to see indicative RUC rates/weight bands under new system 121. Arel Earthworks wants more information about how the RUC weight will be determined and what the new cost of RUC will be A One Movers submits that the changes in the Bill amount to a change in taxation and it is unacceptable that the actual charges for taxpayers are not stated The Motor Caravan Association notes that they do not know what effect the suggested weight bands would have as we do not know where the different bands begin and cease Toll NZ submits that the Bill should contain a requirement for industry consultation on proposals to regulate changes in the definition of vehicle types, the weight bands, and the road user charge applying to the types and bands IPENZ notes that the charges will be set under regulations and that this implies that there will not be an opportunity to comment on the charges Dynes Group submits that transport investment is in no mans land, as operators wait to see what effect the setting of RUC weight bands will have on their industry MIA is concerned that uncertainty around new RUC rates and the setting of bands is causing operators to hold off on purchasing decisions. MIA Page 20 of 189

21 recommends that the new RUC rates and weight bands are published as soon as is practicable. MTA s submission expressed similar concerns MIA also recommends wide weight bands for heavy vehicles as many narrow bands will introduce unnecessary inefficiencies in new and used vehicle markets The FOA notes that improvements under the RUC system will be dependent upon the setting of appropriate weight bands through regulation. The lack of information on how the weight bands will be structured is causing uncertainty for road freight operators, potentially affecting investment decisions The RTF submission accepts that a move to fixed RUC weights could potentially reduce administration and compliance costs. The submission goes on to say that any improvement will be very dependent upon the setting of appropriate weight bands through regulation The RTF submission also notes that the lack of information on the likely weight bands is causing considerable angst and uncertainty for road freight operators RCNZ requests that industry be consulted during the drafting of regulations. Requests for exemption/special rates for specific vehicles 133. McLean Road Services requests an exemption for trucks that are used only for towing purposes and do not carry any payload The Crane Association submits that cranes are overcharged under the current RUC system and will continue to be overcharged under the new RUC regime. The Crane Association requests that a separate set of RUC rates should be applicable to cranes Inter freight submits that the RUC rates need to allow flexibility to purchase light RUC or heavy RUC depending on the product that a vehicle is used to cart (that is light, bulky products such as packages and furniture, as opposed to heavy products such as metal and bricks) The Motor Caravan Association believes the Bill should enable owners of motorhomes to purchase RUC licences at a RUC weight sufficient to cover their actual laden mass, as they will not ever be operated near the maximum permitted laden weight The BCA requests that buses and coaches be included in a separate RUC class, as buses and coaches generally operate at weights considerably lower then their gross maximum weight or their maximum weight as permitted under the VDAM rule EROAD notes that commercial passenger vehicles and heavy haulage operators may require different charging arrangements because they would be adversely affected by RUC charges calculated on the basis of [maximum] gross weights. Page 21 of 189

22 139. The FOMC suggests that an exemption from paying usual RUC rates be available for heritage vehicles The RTF suggests that the Chief Executive should have the power to set a RUC weight determination for specialist vehicles and vehicles that have been modified as certain vehicles will never be able to operate at their GVM or maximum allowable mass under the VDAM rule. RCNZ makes a similar submission in relation to spray trucks, while FOA states this is also the case for specialist vehicles in the forestry industry. Page 22 of 189

23 Topic B Clause 12: Additional RUC licences Background 141. Clause 12 provides a charging regime for those vehicles that operate under overweight or high productivity permits. This is not necessary under the current RUC system as the RUC payable under the RUC Act 1977 can cover any weight nominated by the operator The general charging proposals in the Bill are aimed at those vehicles that operate within the maximum mass allowable for individual or combination vehicles under the VDAM Rule Every individual vehicle, whether a powered vehicle or a trailer, has a maximum weight that is determined by the VDAM Rule. The maximum weight is imposed for safety reasons and to protect the roading infrastructure from damage The VDAM Rule also sets maximum weights for combinations of a powered vehicle and 1 or 2 trailers. The maximum combination weight is usually lower than the sum of the individual maximum weights The highest normal maximum weight in New Zealand for any combination vehicle is 44 tonnes. When the 1,500kg tolerance is added this amounts to 45.5 tonnes, which some operators may take as the regulatory standard Many modern combination vehicles are rated by their manufacturers to perform safely at weights well above 44 tonnes as high as 60 tonnes or more. In New Zealand not all roads and bridges can accept very heavy traffic without damage hence the general lower regulatory limit Notwithstanding the normal maximum weight under the VDAM Rule, there are times when vehicles may travel above that weight. They do so under overweight or high productivity permits issued by the relevant road controlling authority under the VDAM Rule The purpose of clause 12 is to apply additional RUC to vehicles that operate under a permit issued under section 5 part 1 of the VDAM Rule. This is necessary because very heavy vehicles impose significant costs on the roads The amount of RUC payable is for the extra tonnage specified in the permit. By way of example, if a combination vehicle has a permit to operate at 9 tonnes above its normal maximum the road user will have to pay additional RUC for that 9 tonnes. The rate of additional payment will be prescribed in regulations The vehicle will not be weighed for RUC purposes. 4 The user of the vehicle will have to produce the permit and evidence of additional payment. 3 It is this maximum weight that is incorporated into the definition of RUC weight in the Bill. 4 On the road side it is likely to be weighed to ascertain compliance with the VDAM Rule. Page 23 of 189

24 151. Clause 12 offers two methods of payment for these vehicles. A road user can purchase the additional RUC prior to the journey and place the evidence of the purchase in the windscreen of the vehicle. An alternate approach is potentially available for those who elect to use electronic RUC management. Those road users would be able to pay after the journey. This option requires regulations and operational development and is unlikely to be in place when the new RUC Act first comes into force The HHA submits that clause 12 allows vehicles travelling in excess of their normal maximum weight on a high productivity or overweight permit to gain an additional RUC licence to cover that extra weight. The HHA agrees that this provision must be made however they have a number of concerns. The HHA strongly opposes mandatory use of electronic distance recorders which appears to be the effect of subclause (2) The HHA submits that subclause (3) is confusing in how the rate will be calculated. It appears to take into account individual vehicles and not combinations The RTF is critical of clause 12. The RTF s submission states that a vehicle operating under a mass based permit issued by the Chief Executive is subject to subclauses (2) and (3) with the enforcement provisions covered in subclause (4). The RTF submits that subclause 4 is not limited to permitted vehicles but rather captures any vehicle operated in excess of its mass limit On page 15 of its submission the RTF comments that subclause (3) inappropriately amalgamates two separate concepts covering a vehicle being overweight for road preservation purposes and being overweight in terms of its RUC liability The RTF accepts that, for road preservation reasons, a vehicle should carry a permit and have additional RUC liability. On page 16 of its submission the RTF proposes that there should be a 10 percent tolerance for this additional RUC liability and RUC audits and RUC recovery would only commence above this level The RTF, on page 17 of its submission, accepts that vehicles operating above 44 tonnes require an additional licence or to be associated with a registration scheme. The submission goes on to say What is unacceptable is locking the additional charge or registration scheme into an association with electronic service providers. This represents an attempt to mandate association with electronic service providers by stealth. The RTF continues that this is at variance with the Minister s statement that operators will continue to have the choice of using an electronic system or continuing with paper RUC licences and hubodometers The following submitters endorse the RTF submission: the FOA, RFH, Roading New Zealand, the Dynes Group, Transcon Warkworth and Transport Investments. Page 24 of 189

25 159. We do not agree with all aspects of the RTF s interpretation of clause 12. In making this comment it appears that we need to consider recommending a re draft which will make the clause clearer As the HHA noted some vehicles may be multi permitted and operate on an irregular basis. On the other hand some vehicles such as a coal transporter may use the same permit consistently We consider that the legislation should offer more flexibility and therefore propose another option for paying additional RUC The HHA asked whether in a multi permitted situation the operator would have to buy an additional RUC licence to cover the heaviest permit. The answer is that it is not the intention of the legislation and we do not consider it is written that way The multi permitted situation does create some difficulties. In the absence of technology it will involve complex auditing because of the potential for gaming the use of the permits We propose that the Bill provide two main options for operators to choose when paying additional RUC. These are set out in detail below. Option one: additional licence 165. The additional licence will be based on the current clause 12. This option will probably appeal to those vehicles that operate under permits on a less systematic basis. Additional licences could be issued in smaller increments than the current supplementary licences. The rates that are to be set in regulations would assume 100 percent (or close to) loading The following comments cover improvements to clause Subclause (1) currently provides that clause 12 applies to vehicles that operate under permits. A permit by definition is a permit issued [by a road controlling authority] under the VDAM Rule Subclause (2) provides that these vehicles must have a distance licence (issued under clause 9). The vehicle with the permit must also have an additional licence or evidence of registration under an alternative payment scheme This subclause is relevant to the RTF s submission that the effect of clause 12 is the mandatory imposition of electronic RUC systems on all vehicles above 44 tonnes. The Dynes Group also makes the same point, as does the HHA The purpose of subclause (2) is to offer two choices. The first is to purchase an additional licence that covers the additional RUC charge. This is the paper option that would be operated in conjunction with hubodometers. The second option is an alternative payment scheme that would be administered electronically. Thus subclause (2) does not Page 25 of 189

26 mandate electronic RUC systems although we agree with the RTF that the alternative payment scheme would only be available electronically We consider that the clause can be improved by giving each alternative a separate paragraph in the drafting. This should remove the confusion that has arisen Subclause (3) specifies that the additional licence covers the difference between the vehicle s maximum allowable mass under section 4 of part 1 of the VDAM rule (for example 44 tonnes) and the maximum mass under the permit (for example 53 tonnes). This example gives a difference of 9 tonnes Subclause (3) attracted the RTF comment that it is an inappropriate amalgamation of the two statutory schemes. In order to address this amalgamation the RTF proposes a 10 percent tolerance in that a RUC audit and RUC recovery would only commence above a 10 percent tolerance. The Dynes Group also proposes a 10 percent tolerance We do not agree with the proposal for a tolerance as we consider a great advantage of the new RUC scheme is to dispense with weighing vehicles for RUC purposes and with the aggravation that tolerances have imposed on the system. For this reason the additional charge to be paid under the overweight permit will be aligned with the maximum weight specified under the permit. It will not be aligned with the actual weight carried. The actual weight carried will not be relevant for RUC purposes The audits conducted under this clause will be to ensure that those who operate under overweight permits have also purchased the applicable additional RUC. It is not intended that audits will attempt to determine the weight of actual loads carried. However given that some vehicles are multi permitted the audits could be complex In response to the HHA s concerns over combination vehicles under this clause we confirm that it is the intention of the clause that one licence would cover combination vehicles. Only the towing vehicle will carry the additional licence. Also, in response to the HHA, we confirm that the additional licence will apply to the value of the permit used on a particular journey. It will not apply to any heavier permit that might have been issued but not used on that journey Subclause (4) creates an offence for failure to comply with clause Unlike the RTF we do not read subclause (4) as applying to all vehicles that exceed their normal maximum mass weight. We consider that the clause only applies to those vehicles that carry a permit. However the clause should be referred to Parliamentary Counsel to consider whether this point may be clarified. Page 26 of 189

27 Option two: joining the H vehicle scheme 179. This option offers an alternative method for additional RUC payment. Under this option an operator that has an overweight permit could elect to join the RUC vehicle H scheme. When a permit is given to a high productivity vehicle, the operator instead of buying additional licences could request the NZTA to assign an H type to the RUC vehicle. The additional RUC payable for this special vehicle type will be set in regulations. It is likely to be based on 55 percent loading The RUC payable for the vehicle would cover the maximum permitted weight of the vehicle. There would also be the choice of entering into an alternative payment scheme for those with electronic distance recorders. The alternative payment scheme will be developed after the new legislation is in force 181. That the Committee note that specific drafting changes related to the above comments are included in Part C (clause 12). Page 27 of 189

28 Topic C The impact of technology on the RUC system Background 182. Many submissions on the Bill relate to the development of technology and the impacts this could have on the RUC system in the future Global positioning navigation systems technology is already used extensively by the private sector for the management of fleets and the tracking of cargo around the world There are, however, constraints operating against the adoption of technology in the government regulatory area, including: the expense of systems and devices insufficient accuracy for regulatory purposes privacy and the management and access to information by government agencies questions around voluntary versus mandatory adoption That said, there is potential for greater technology use in public sector regulation as the costs of technology continues to fall, and its accuracy and performance continue to improve. New Zealand and RUC technology 186. Between 2002 and 2004, the government investigated the possibility of electronic distance recording technology being used for RUC. The costs at the time were not economical for the government s preferred voluntary system In 2007/08 the Review favoured the use of electronic distance recording technology and advocated that it be tested in a proof of concept trial By early 2009 it was apparent that there was at least one product on the market that met the accuracy standards for distance measurement. 5 Government decided that given a product was available, it should offer the industry the voluntary choice to replace hubodometers and paper licences with an electronic distance recorder Regulations were made under the RUC Act 1977 that allowed electronic distance recorders to be approved if they met the required performance and accuracy standards. This accuracy is ascertained in part by independent engineering tests. The regulations enable applications to be open to any applicant. 5 To our knowledge there is no on board weighing technology that would meet regulatory accuracy and tamper resistance requirements. Page 28 of 189

29 190. A number of possible providers have expressed interest to the NZTA and the Ministry but to date only EROAD s products have been approved for use as electronic distance recorders instead of mechanical hubodometers An electronic system provider must also have an agreement with the NZTA to issue licences, therefore under the current law there are two separate approval processes (electronic distance recorder and licence issuance) Although a number of possible providers have expressed an interest to the NZTA and the Ministry to date only EROAD s products have been approved for use as electronic distance recorders instead of mechanical hubodometers. The RUC Bill The Bill builds on the regulatory scheme under the RUC Act The use of technology by road users continues to be voluntary. The Bill allows for electronic RUC technology to apply to both light and heavy RUC vehicles The Bill combines the two separate applications for approval, as above, into a single approval scheme. The intention of the Bill is that all eligible providers who meet certain performance and security requirements are able to be approved The Bill also contains (in schedule 1) transparent provisions for information management. Currently, this is managed under the terms and conditions of a provider s approval Electronic service providers are also required to assist the RUC collector in cases where tampering with the system is suspected Knight Train Haulage supports the use of electronic RUC systems. TR Group expressed similar support for the use of technology R E Johnson submits that the costs of having an electronic RUC system installed outweigh the benefits of the system Fonterra is strongly supportive of the integration of new technology into the RUC system and notes that provisions in the Bill regarding electronic distance recorders are an important first step in recognising modern technologies A One Movers deem the move to gross weights to be a regressive one and asks why New Zealand is moving to a less accurate charging methodology at a time when the trend is for more accurate charging The AA strongly supports the introduction of electronic RUC and also supports further investigation of making RUC a more electronically based system in order to help reduce compliance costs for light vehicles Federated Farmers supports the objectives behind the introduction of electronic RUC systems but comments that many rural users may struggle Page 29 of 189

30 to see the benefit of electronic RUC due to poor telecommunication services in rural areas Federated Farmers also has concerns about how the information captured by electronic RUC systems will be used. As such, it wants to see guidelines established that clearly set out how data will be managed under electronic RUC systems IPENZ is supportive of moves to introduce electronic RUC and want to ensure that the NZTA is undertaking the proof of concept trial on an electronic RUC systems architecture, as was recommended by the Review in its final report The MTA supports the introduction of a framework that allows for electronic RUC RCNZ submits that information that is available through electronic RUC systems should be only used for the purposes for which it was originally created and attempts by other organisations to use the data should be stringently monitored EROAD supports moves to introduce a regulatory framework for electronic system providers. Clarification of the approvals process and regime will encourage the development of electronic RUC solutions, and will support the uptake of electronic RUC EROAD notes that there will be regulations supporting this provision. EROAD expects to be consulted on the regulations A number of issues have been identified with technology: the role of technology in the RUC system whether technology should be voluntary or compulsory how should information gathered and held under in an electronic system be managed whether there should be a dual system of RUC calculation for vehicles with technology and those without. The role of technology in the RUC system 210. Most submitters support the use of technology in the RUC system. A smaller group is less supportive and is concerned about the management of information One submitter comments that the cost of technology outweighs the benefits. We agree that for some firms, the choice may not be economic but for some it will be. The cost is set by the electronic system providers. Page 30 of 189

31 Should technology be voluntary or compulsory 212. During oral submissions, most submitters stated that technology should be voluntary although some suggest that there could be a place for compulsion in special circumstances such as operating under high productivity permits Some submitters read clause 12 as mandating technology. This issue is discussed in Topic B of Part B where we confirm that this is not the intention of the Bill. The adverse reaction to this possibility shows that there is a high degree of resistance to compulsory electronic distance recorders. The expense of mandatory electronic distance recorders is also an issue We consider that there needs to be a higher level of acceptance before compulsory use of technology is considered. The RUC technology market also needs to develop further with more choices available to road users. How should information gathered and held under an electronic RUC system be managed? 215. It is likely that for the foreseeable future operators will choose electronic RUC management offered in conjunction with fleet management services. This means that RUC information and information held for fleet management must be managed properly. There are currently no guidelines for information management Many submitters express concern over the management of, and access to, information obtained under an electronic RUC system. The information available to public officials under this Bill should be specific to RUC. Other information held by the provider should be kept separate. Industry requested that a code of practice be established, and that they be involved in its development We consider that the Bill in clause 40 and schedule 1 does cover these concerns. Regulations can also be made covering the management of this information. The industry will be consulted on any regulations. Should there by a dual system of RUC calculation for vehicles with technology and those without? 218. Some submitters like Fonterra and Toll NZ advocate greater use of technology. They suggest that it would be better for operators with advanced technology in place to remain on the operator nominated weight system. In the case of Fonterra, it argues that it could operate on an actual weight and time basis (which the current system does not provide for) Most operators would still be nominating the estimated weight they will carry over the journey. Some vehicles have on board weighing units but these are not sufficiently accurate or secure for charging purposes. Page 31 of 189

32 220. Bulk liquid carriers, like Fonterra, are in an unusual situation in being able to accurately calculate the weights. Their tankers have equipment to measure the volume of the liquid accurately. The weight is then derived from the volume and the specific gravity of the liquid While a nominated weight system may suit some operators such as Fonterra, for most operators electronic distance recording does not solve the enforcement and administrative problems of nominating weights In addition, it would be very difficult to set up two RUC calculation systems. The administrative costs for government would be considerable. For instance, it would be difficult to forecast revenue if firms moved from one system to another. The operators under the two systems could well engage in arguments as to who was paying the correct rates and raise issues of equity and fairness. These issues are already present under the current system but would be aggravated if a two tier system were introduced For the above reasons we do not support the introduction of a dual system That the Committee note that: (a) technology is an area with greater potential in the future (b) we consider the general basis of the technology proposals is sound for the current time (c) specific drafting changes related to the above comments are included in Part C on clause 39 and schedule 1. Page 32 of 189

33 Topic D Recordkeeping and assessment provisions in the Bill Background 225. A number of submitters questioned the need for the Bill s recordkeeping provisions and the period of time that records are required to be held for Under the RUC Act 1977, 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 in the Bill will help to ensure that the RUC collector is able to efficiently recover unpaid RUC. The usefulness and cost of keeping the records (including types of records to be kept) 228. The AA questions the cost of record keeping for small operations The BCA questions the usefulness of logbooks in their sector. It notes that a bus driver may drive different vehicles, therefore reconciling the measurements [for a particular vehicle] would require piecing together log book records across a range of drivers. Secondly a vehicle may be used for both log book and non logbook requiring operations. Vehicles throughout the bus and coach sector are often shared The BCA also questions the precision of the other records to be kept. It submits that there should be a clear, definitive list so that operators are aware of the extent of their obligations and the records should actually assist the enforcement officials. The BCA submits clause 59 should be removed The BCA submits that the costs of developing and implementing a comprehensive recordkeeping system will be significant as the scale of the recordkeeping may require specific RUC data storage facilities The FOA submits that most of the documents specified in the definition of RUC have no relevance given the simplified provisions of the Bill The HHA considers that the scale of records to be retained is highly onerous. The submission questions why records relating to the transport of goods up to the normal maximum load need to be kept The HHA believes that the recordkeeping aspects of the Bill will result in significant increases in compliance costs for operators and that, in the current economic environment, such increases are not justified The RTF questions the need to keep all the records listed in the definition. The RTF identifies manifest and waybills as being onerous as these are Page 33 of 189

34 not required by any other statute (paragraph (f) of the definition). The RTF also mentions the expenditure records in paragraph (b) and invoices relating to the use of the vehicle in paragraph (d) as being onerous The RTF submits that many of the records to be kept under the Bill are unrelated to the requirements of the Bill and that the Bill confers too much power on the RUC collector to take records. Time period that records must be kept and time period for assessment 237. A number of submitters question the length of time records needed to be held for under the Bill. These included Federated Farmers, RCNZ and the RTF The FOA submits that assessments for unpaid RUC should only apply to a period for up to two years before the assessment is issued The RTF submits that the simplified RUC system under the new Bill, in addition to the increasing availability of electronic information available to the RUC collector, means that it will be very difficult for an operator to under pay for RUC for up to 6 years. Accordingly the RTF submits that the period for which assessments can be issued should be reduced to two years. The usefulness and cost of keeping the records 240. The definition of records in the interpretation clause is as follows: records, in relation to a RUC vehicle, means documents that record the use and maintenance of a RUC vehicle, including(without limitation) (a) logbooks (b) financial records and invoices relating to expenditure on fuel and maintenance (c) any permits issued under section 5 of Part 1 of the VDAM Rule 2002 (d) invoices relating to cartage or use of the RUC vehicle (e) records indicating which vehicles carried particular loads (f) waybills and manifests (g) time keeping records (excluding wage records) 241. The HHA questions the need to keep records in relation to weight. The Ministry agrees with this comment but it is not the intention of the Bill to require these types of records. The changes we are proposing will reduce record keeping obligations The NZTA advises that (as the BCA submits) it is a painstaking procedure for auditors to reconcile logbooks. Logbooks do still provide valuable information if hubodometer fraud is suspected, so the time spent on these reconciliations is worthwhile from the RUC collector s perspective. Page 34 of 189

35 243. Many of the submitters state that the proposed record keeping duties are onerous. We agree with the RTF submission that waybills and manifests be removed from the list. For item (b) in the definition we propose the removal of the word financial which will partially address the RTF s concerns. Many of the other records are required to be kept for 7 years for Inland Revenue purposes As a result, we have decided to recommend a reduction of the range of records to be kept under the Bill. A full list of the proposed changes is included in the draft table at the end of this topic. Time period that records must be kept and time period for assessment 245. We have reviewed the time period for the records to be kept. For those records that are to be kept for 7 years for Inland Revenue purposes, we recommend these be kept for 6 years for RUC purposes in line with the RUC assessment period Generally for other records we recommend 2 years (as favoured by some submitters). For log books the recommendation is 1 year to align with other land transport legislation While we agree that it is more useful to undertake assessments earlier in the time period, the NZTA advises that it is useful if the assessment period remains at 6 years. Summary Table 248. The table overleaf (Summary table of recordkeeping proposal) contains commentary on the proposed changes That the Committee note that specific drafting changes related to the above comments are included in Part C (clause 5). Page 35 of 189

36 Summary table of recordkeeping proposal Definition in interpretation clause of Bill Proposed change records, in relation to a RUC vehicle, means documents that record the use and maintenance of a RUC vehicle, including (without limitation) Delete the words without limitation to create a closed list of records to be kept under clause 59. (a) logbooks; Logbooks are kept for 1 year under the Land Transport Act Change the recordkeeping period in the Bill to 1 year. (b) financial records and invoices relating to expenditure on fuel and Delete the word financial. maintenance; Split this clause into the two components set out below: records relating to the maintenance of specified RUC vehicles (These records relate to the distance a vehicle has travelled. Keep for 2 years as not required for Inland Revenue purposes) (c) any permits issued under section 5 of part 1 of the VDAM Rule 2002; (d) invoices relating to cartage or use of the RUC vehicle specified in the invoice; (e) records indicating which vehicles carried particular loads; (f) waybills and manifests; (g) time keeping records (excluding wage records); invoices relating to expenditure on fuel and maintenance (These records relate to the distance a vehicle has travelled. We expect these records to be kept for Inland Revenue purposes so recommend keeping for 6 years). These are permits for overweight vehicles. As holders of these permits will buy additional RUC the permits need to be retained. Keep for 1 year as they are not required for Inland Revenue purposes. We expect these records to be kept for Inland Revenue purposes. Change recordkeeping period in the Bill to 6 years. Delete this item. Delete this item. Delete the words excluding wage records. The NZTA advises that all time records are useful information for assessments. We expect these records to be kept for Inland Revenue purposes. Change recordkeeping period in the Bill to 6 years. Page 36 of 189

37 Topic E Penalties Background 250. The penalty regime under the RUC Act 1977 has not been reviewed for many years and some penalties have not been increased since The levels of penalty under the RUC Act 1977 do not recognise different levels of offending. There is limited use of infringement offences The proposals in this Bill aim to modernise and simplify the RUC system so it is natural to retain the jurisprudence of the current system where appropriate. Thus, many of the summary offences 6 in the Bill are carried over from the RUC Act Despite inflation since 1977, many of the proposed penalties in the Bill remain the same where the offending is less serious The Bill applies higher penalties where the level of offending involves fraudulent or deliberate behaviour The Bill also sets in place an extended infringement offence regime for the less serious offences. The infringement fees will be set under regulations There are some criticisms of the scale of penalties in the Bill, and some submissions in support of the penalty regime The HHA comments that a fine of $15,000 for a company seems excessive for an offence of failing to display a RUC licence The HHA also submits that penalties of $25,000 for an individual and $100,000 for a company that fail to keep records are unduly punitive given that some of these records will be very difficult to create and retain. Federated Farmers has similar concerns about the level of these penalties The AA is strongly supportive of the changes to the light vehicle penalty regime as it will simplify enforcement The AA submits that a flat infringement fee of $200 may be an incentive for deliberate avoiders to create very large RUC overruns. The AA also submits that there should be an increase in infringement fees for those who have very large amounts of underpaid RUC The Dynes Group submits that some penalties set out in the Bill are outrageously punitive and that the Bill should focus on making compliance easier for operators rather than setting overly high penalties for failing to comply. 6 Summary offences are matters dealt with by the Court that are at the lesser end of seriousness. Page 37 of 189

38 261. The FOA submits that an administrative error in an application may trigger a fine of $75,000 and submit that this penalty is out of keeping with the magnitude of the offence. The FOA expressed a similar concern around fines being excessive for the offences in clauses 22 (RUC licence to be provided to purchaser of vehicle), 25 (operating with obscured licence) and 59 (duties to make and retain records) The FOA also submits that the offence of failing to display a licence should be more in line with the penalties for failing to display a transport services licence under the Transport Act The RTF submits the fines set out in clause 19 (display of licence), clause 22 (current RUC to be supplied on sale of vehicle), clause 23 (altering and defacing a licence), clause 25 (operating with an obscured licence) and clause 59 (failure to keep records) are excessive for the offences involved William Abraham submits that some of the penalty regimes for compliance on trivial matters are outdated Fonterra in a verbal submission said penalties should be set at the higher end. Summary offences 266. As with all summary offences, the Bill sets maximum penalty levels. It is within the discretion of the courts to impose an appropriate lower level of fine based on the circumstances of the case We agree, however, with submitters concerns over the penalty levels for two of the more administrative type offences and propose that these be reduced to $1,000 for the individual and $5,000 for the corporate offender The intention of the Bill for those penalties that have been increased, is to target behaviour that involves deliberate attempts to undermine the system such as providing false information or tampering with distance recorders. The penalties are set at a level that is designed to set a financial disincentive or deterrent against such behaviour The RUC system deals with large amounts of money, and in most cases the RUC payers have more information than the RUC collector. This is a risk the government needs to manage The table at the end of this topic (Summary table of penalty concerns) contains specific comments on the offences identified by submitters. Infringement fees 271. The new policy also includes proposed new infringement offences that are to be set under regulations. The distance infringement fees are lower than those existing under the RUC Act Page 38 of 189

39 272. The following graph illustrates the impact of the current and proposed infringement penalty regimes on a typical goods distribution vehicle which is 3,000 kilometres overrun on its RUC distance licence The graph below illustrates the impact of the current and proposed infringement penalty regimes on a light RUC vehicle, which is 3,000 kilometres overrun on its RUC distance licence The new infringement fees also cover a wider range of offending The New Zealand Police advise that, generally they will use the infringement offence regime in preference to putting minor matters before the Court. Page 39 of 189