Firms yet to benefit from fuel tax cuts

Mainland Air chief executive Philip Kean outside the company’s hangar at Dunedin Airport. PHOTO:...
Mainland Air chief executive Philip Kean outside the company’s hangar at Dunedin Airport. PHOTO: LINDA ROBERTSON
Fuel-dependent businesses say the recent tax cut has had no impact on them and they are still paying record prices at the pump.

Also, they warn it will continue to hit their customers’ back pockets.

On Monday, the Government cut fuel taxes by 25c a litre for three months in order to curb some of the effects caused by the energy crisis because of the Ukraine conflict.

For diesel users, it also slashed the cost of road user charges by the same amount.

However, businesses spoken to yesterday have not seen the benefit at the pump yet.

Mainland Air operates charter flights and pilot training from Dunedin Airport. Its chief executive Philip Kean wrote to the Ministry of Business, Innovation and Employment (MBIE) on Tuesday about his concerns with the tax cut.

The aviation sector had to pay up to 90c a litre on fuel for a road tax, which meant its fuel prices remained "very high".

"We don’t even use the road," Mr Kean said.

Fuel was one of the biggest costs in running an airline, which made it "very tough" operationally.

The company had recently put up its prices for charter flights by $10 an hour to try to cover the cost.

After Monday’s announcement, Mr Kean had not noticed a drop in fuel prices, saying "they are still the exact same as they were before".

Higher fuel costs were also being felt by Outram rural contracting business Flett Contracting.

Owner Justin Flett said fuel was a "massive" part of his business’ daily expenses.

Mr Flett bought fuel in bulk so did not see the daily increase, but that did not mean the "rapid rise" was not felt.

"When one of your biggest expenses is increasing at that rate, it is tough, very tough."

That meant having to pass the cost on to the farmers, but if they kept doing that they have would see if it was still viable and could consider other options.

As it was not the peak contracting season, they were not using as much fuel at the moment either, Mr Flett said.

Horticulture New Zealand warned rising costs, including fuel, would continue to affect vegetable prices.

Its president, Barry O’Neil, said cutting the tax and road user charges for three months was positive, but it had no impact on the "significant increase" in the cost of diesel.

Between December last year and this month, the cost of diesel had risen from $1.67 a litre to about $2.40 a litre.

That increase — combined with cost increases in labour, seed, fertiliser, freight and compliance — was putting some growers "perilously close" to going out of business, Mr O’Neil said.

"Unless consumers are prepared to pay for the increased costs of growing vegetables, we will see an exodus from growing vegetables in New Zealand," he said.

MBIE was contacted yesterday about Mr Kean’s letter and referred comment to the Ministry of Transport.

Manatū Waka Ministry of Transport Marian Willberg said today that larger aircrafts, including commercial and passenger, use Avgas or jet fuel, were not covered by the tax.

However, smaller aircrafts could be run on the same petrol as a motor vehicle and were covered.

The duty paid on petrol used in aircraft could be used to support recreational aviation safety activities.

The Government was currently funding the provision of Instrument Flight Procedures in a number of unattended aerodromes mainly used by recreational aircrafts, she said.

In regards to RUCs, Minister of Finance Grant Robertson said during Monday's announcement that officials were currently working through how to reduced RUCs would be implemented, and Transport Minister Michael Wood would be providing details later this week.

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