Proposed Goal and Design Principles
The proposed goal and design principles for royalties are given below.
| Goal | Resources owned or managed by the Crown should be used in a manner that maximises the net benefits to New Zealanders. |
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Design principles
| 1 | Any royalty regime should aim to ensure that any given resource is allocated to its highest value use (in the widest sense of value) and allow for that allocation to adjust over time as appropriate. |
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| 2 |
The Crown may determine that a financial return is either not required or can be reduced, or a subsidy applied, in circumstances where: i) a particular use of a resource has wider community benefits (i.e. positive net externalities) that exceed alternative uses; ii) use is non-competing and/or non-exclusive; [5] iii) charging is not cost-effective; iv) charging would breach New Zealand’s international commitments; or v) other methods of achieving the goal are more efficient. |
| 3 |
Any charging regime should aim to: (a) minimise administration, compliance and transaction costs, including being as uniform as possible across locations, users and uses; (b) provide certainty for investment and include fair transition provisions where relevant. |
| 4 | The revenue from a royalty regime should generally be used in the manner that will obtain the greatest benefit for New Zealand or the local authority area in question, whether or not that relates to the activity being charged for; [in most cases this will probably mean treating it as general Crown revenue to be allocated through the Budget process]. |
The remainder of the paper describes different charging mechanisms and the role of royalties, and then works through the reasoning behind the above goal and principles.
Notes
- [5]i.e. use of the resource by one person does not reduce the ability of any other person to simultaneously use it; many resources can meet this test only up to a certain threshold; e.g. a beach until too many surfers arrive, or air quality in a city until too many cars are in use.
