The Government is to make the installation of security cameras in taxis compulsory.
Transport Minister Steven Joyce says the Cabinet believes the move is necessary to ensure the safety of taxi drivers and passengers in bigger towns and cities.
Since December 2008, there have been a number of serious attacks on taxi drivers, including two deaths.
The new rules will apply in cities and other areas where there are more than 20 taxis in operation and the Government is proposing that all vehicles be fitted with cameras.
Drivers who do not comply could face fines of up to $2000 and taxi companies up to $10,000. Higher standards will also be set for the telecommunications systems used by taxi operators.
Mr Joyce says installing cameras in taxis will change people's behaviour and reduce crime.
The minister says taxi cameras have been successfully used in main cites in Australia and international evidence shows that the introduction of cameras can reduce the amount of assaults by up to 70% and reduce the amount of evasion of fares by up to 70%.
"It's not a 100% solution, but it does seem to have significant benefits."
Mr Joyce says the taxi industry will have to pick up the cost of the changes, and the rules are expected to be in place by the middle of 2011.
Taxi Federation welcomes move
The taxi industry on Tuesday welcomed the decision to bolster the safety of its drivers.
Taxi Federation president Kevin Braid told Checkpoint the cameras are needed.
"I've been to a couple of funerals; I've visited a lot of bashed, smashed taxi drivers in hospital. Our own company (Wellington Combined) had a chap a few years ago beaten up severely with a hammer - it's ruined the rest of his life.
"I believe we've got to look after ourselves (and) I'm strongly advocating anything that's going to enhance the safety of our drivers."
Mr Braid says it is likely taxi companies will band together to get a better deal on cameras, which cost about $1000 each.
Listen to Checkpoint interview with Kevin Braid