AA calls for no GST on petrol tax

The Automobile Association wants the Government to scrap GST on petrol excise tax but Prime Minister John Key says no.

Petrol prices have spiked in recent days and AA senior policy analyst Mark Stockdale said today the Government could help.

The excise charged on petrol was about 62 cents per litre and GST was charged on top of that as well as on the fuel component.

"The tax on a tax works out to be about 8 cents per litre which is an unjust tax. It's difficult to think of another example where you pay a tax on a tax," Mr Stockdale told NZPA.

"It's something that the AA has always felt should be removed because it's not fair to New Zealanders to be paying tax twice.

"Motorists are hurting, prices are at near record highs and a large component of the fuel price is tax. Most of that tax is fair it funds the road network, motorists understand that but they don't appreciate paying tax twice."

Mr Stockdale said the change could be made incrementally.

Mr Key said he did not support the change.

"No, and the reason for that is there's a number of revenue streams that we get. GST is one, and obviously you can see our revenue is under a lot of pressure anyway with the likes of the earthquake. And secondly, in terms of the excise that comes off the petrol tax, that's used to pay for the roads, and there's enormous demand to rebuild roads."

Labour leader Phil Goff also did not support removing the tax.

"That's not a policy we feel that we can afford at this time," he told reporters.

"We're not proposing to take GST off petrol. What we are proposing to do is to increase the incomes of middle and low income people so they can afford the sort of shocks that those petrol prices have produced."

Green Party co-leader Metiria Turei said the idea was worth looking at.

"We would look at all the different options available for how to reduce the cost of living. Part of that is increasing incomes, which we have advocated for a very long time, but I don't want to make any commitments to any particular ideas like that until there's been a proper conversation held about it."