Business Tax Breaks for Clean Transport Options

The Green Party will incentivise businesses to choose clean transport options for staff.  

Business Tax Breaks for Clean Transport Options

The Green Party will incentivise businesses to choose clean transport options for staff.

 

The Income Tax (Clean Transport FBT Exclusions) Amendment Bill will: 

1.       Exempt electric vehicles provided by employers from fringe benefit tax

The Green Party will incentivise businesses to purchase electric vehicles by making electric vehicles exempt from fringe benefit tax. Lowering the cost of electric vehicles will stimulate demand for electric cars and their charging infrastructure, and create a second hand market for electric cars in a few years’ time when businesses replace their fleets.

2.       Exempt public transport passes provided by employers from fringe benefit tax

The Green Party will also incentivise businesses to provide their employees with public transport passes to get to and from work.

What is Fringe Benefit Tax?

Fringe Benefit Tax (FBT) is a tax on non-cash benefits that employees receive as a part of their salary package. The most common benefits are cars and health insurance. By removing the FBT on business purchases of electric vehicles, we’ll provide a major cash incentive for companies to swap their fossil fuel-burning vehicles for a more efficient, cost effective, and clean fleet. Removing FBT on public transport passes will make it cheaper for companies to subsidise public transport instead of carparks, because FBT doesn’t apply to carparks on company property.

Why do we need this?

Electric cars are an important part of the solution to our transport pollution problem. Pollution from transport makes up 20 percent of New Zealand’s greenhouse gas emissions, and road transport is the cause of 90 percent of this. To play our part in the global effort to prevent climate change, we must reduce emissions from road transport. Between 75 and 80 percent of New Zealand’s electricity is generated from clean, local sources. Yet we spend over $6 billion every year importing petrol and diesel for our vehicles. There are enough new renewable power plants like windfarms consented and ready to be built to provide the extra electricity needed to power millions of electric cars in New Zealand.

But there aren’t many second hand electric cars around and buying a brand new car is too expensive for most people. This bill will help to create a second hand market for electric cars in New Zealand, putting them in the financial reach of families and individuals in a few years’ time.

How can the Government lead the way?

The Green Party has often said that the Government should replace the fleet of Crown limousines with electric cars. Now we’re going further. Businesses and the Government can transition to electric cars together. We think that within 7 years, at least 20 percent of all cars the Government buys should be electric. We’ll increase this target if there are more affordable and fit-for-purpose electric cars available by then.

How will it work?

The exemption for public transport passes is forever. There is very little cost associated with this, because the number of businesses who currently provide free public transport passes that are subject to fringe benefit tax is very low. The exemption for electric vehicles is for seven years, after which a sustainable market for new and used electric cars will have developed. The cost varies depending on how successful the policy is. A one percent uptake rate would decrease the amount of tax revenue the Crown received by up to $4.77 million in the first year. In the seventh and final year of the policy, under a low uptake scenario the Crown’s tax revenue would be reduced by $24 million (5 percent of eligible vehicles), under a medium uptake scenario it’d be reduced by $47 million, and by $95 million in a high uptake scenario (20 percent of eligible vehicles).

There are already more than 120 public electric vehicle charging stations in New Zealand, but many of these take hours to charge a vehicle. The Green Party already has a policy to invest $10 million to support the development of more fast-charging stations, which can charge a car in 30 minutes. The $10 million investment in 480-volt direct current fast-charging stations was costed in 2014. It is estimated to pay for at least 30 fast charging stations along key road routes.

How can clean transport choices aid economic development?

Electric vehicles could be a game-changer not just for the transport fleet, but also for the electricity network. The ways in which electricity is generated and distributed are changing. At the heart of next generation electricity networks are sophisticated IT systems. If the Government shows leadership around changing transport and electricity network technologies, New Zealand companies will embrace new opportunities to create jobs and world-leading expertise.

New Zealand has the fourth worst road traffic intensity in the OECD.  There is a significant economic cost in terms of lost productivity, and also damage to public health and the environment. In big cities like Auckland, public transport is the cleanest and most efficient way for people to get around, especially at peak times. Better public transport options can also lead to people repurposing carparks for more productive land use, including housing.

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