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Principles for Royalties on Non-Mineral Natural Resources in New Zealand - PP 06/08

Appendix 2: Summary of charging mechanisms

  Possible characteristics Examples
General taxes

Can be lawfully levied only by or under an Act of Parliament. Compulsory, for public purposes, enforceable by law.  Compulsory unrequited payment to government.

Revenue goes to a general fund.   

Income tax. 

Goods and Services Tax.

General local government rates.

Tied taxes

Can be lawfully levied only by or under an Act of Parliament. Compulsory, for public purposes, enforceable by law.  Compulsory unrequited payment to government.

Revenue used to fund specific activities.

A proportion of petrol excise.
Duties and Excises

Taxes collected solely at the border or otherwise by the Customs Service.  Commodity specific.  Usually fixed rather than proportional to value. 

Revenue goes to a general fund. 

Alcohol, tobacco, petrol excises.

Customs duties.

Levies Collected under statutory authority but not necessarily by government.  Can be used to fund “club goods” where benefits flow to small group of people but are not excludable within the group.  Both “free rider” and “forced rider” risks arise.[17] Commodity levies.
Fees and charges

Levied more or less in proportion to services provided. 

Revenue tied to fund specific activities.

Fisheries user charges.
Royalty

Charged in relation to resource use.

Revenue may go to a general fund or to fund specific activities.

Oil and gas royalties.

Auctions of rights to use marine space for fixed periods for specified uses – payments may be lump sum or periodical.

Notes

  • [17]A “free rider” problem is where consumers have an incentive to hide true willingness to pay since they will still be able to consume the good. This may mean goods or services are under-provided. Compulsory payment can create a “forced rider” problem where consumers bear a cost that exceeds the benefits they receive.
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