The Victorian Government has followed the example of the South Australia Government and announced the imposition of an electric vehicle (EV) road tax from July next year.
The tax, which was announced by Treasurer Tim Pallas over the weekend, will impose the tax of 2.5c a kilometre for full EVs, and 2 cents a kilometre for plug in hybrid vehicles. This means that an EV travelling 20,000 kilometres a year would be slugged around $500 annually, or $400 for a plug in hybrid.
The tax has received strong push back from some quarters. These include The Australia Institute, which emailed the following:
A new tax on electric vehicles has been announced by the South Australian and Victorian governments and the NSW government has said it will follow suit next year.
A new electric vehicle tax makes no sense and we need your help right now, to help stop this great big new tax on not polluting in its tracks.
So far, it’s only South Australia, Victoria and NSW who are proposing this tax on zero emissions cars. But if we don’t stop it right now, other state governments will follow, and this could be enough to destroy Australia’s nascent electric vehicles market.
Australia needs more electric vehicles on the road, not less.
The Electric Vehicle Council is livid:
Behyad Jafari, CEO of the Electric Vehicle Council, described the announcement as “shameful” and said he had repeatedly tried to obtain meetings with the Victoria government without success…
“I can’t begin to express how strange and disappointing this is from state governments,” Jafari said in a Tweet. “Having made no move to incentivise electric vehicles, they have waived the white flag on electrification and decarbonisation for a few measly bucks…
“No other nation on Earth has thought it sensible to apply a special new tax to electric vehicles. It makes no sense to keep burning foreign oil that clogs our air with pollution. Why would we slow the transition to cleaner and healthier air by imposing a new and unnecessary tax?“…
The EV industry accepts that a road user charge is inevitable as the car fleets transition to electric, but argue it should be introduced fairly and evenly.
As are The Greens:
“This is a lazy tax that squibs the wider reform of replacing fuel excise with road user charges,” transport spokesperson Sam Hibbins said in a statement.
“Placing a standalone tax on electric vehicles without wider reform will act as a disincentive for cleaner air and lower emissions.”
However, Infrastructure Partnerships Australia supports the move:
Adrian Dwyer, the chief executive of Infrastructure Partnerships Australia (IPA), a think tank that has called for road user charges for electric vehicles, said the tax would help ensure roads were paid for as more people transitioned away from petrol- and diesel-powered vehicles.
Currently, roughly 42c per litre on petrol and diesel fuel goes to the Federal Government.
“Right now we raise about $11 billion per year through fuel excise, and that’s in terminal decline with the greater fuel efficiency of vehicles,” he said.
“As those dollars go, the money’s going to need to come from somewhere to pay for roads.”
Mr Dwyer also rejected the idea the new tax would push people away from electric cars.
“I think it’s pretty clear that if someone’s buying a $180,000 Tesla, they’re not going to be disincentivised by a couple of hundred bucks a year on road user charges,” he said.
“That would just be demonstrably untrue.”
As does Australian Automobile Association managing director, Michael Bradley, who wants the EV tax to go national:
“The technological shifts we’re seeing in the car market are good for consumers and the environment, but they are also going to significantly undermine the federal budget and its reliance on fuel excise revenue to fund transport projects” …
“The federal government must step in and ensure tax changes are nationally consistent, equitable, and progressed in a manner that does not disincentivise technological transition.”
Mr Bradley said 80 per cent of respondents to an AAA survey this month had agreed owners of electric vehicles should contribute towards the costs of roads in some way.
Here’s the problem. Australian motorists paid $19.68 billion in fuel excise tax in the 2019 financial year. But with the Electric Vehicle Council predicting 50% of new cars sold in 2035 will be electric, Australia’s governments are facing a budgetary black hole:
This is because the shift to both more efficient conventional vehicles as well as electric vehicles will cause fuel excise receipts to collapse:
This means policy makers will have to move to some sort of direct road user pricing to cover costs, as has occurred above with Victoria’s EV tax announcement.
The 2c a kilometre charge on EVs is still a bargain compared to the 42c per litre paid by conventional motorists using petrol and diesel vehicles. These conventional motorists will still contribute far more towards road cost recovery than their EV counterparts.
However, the EV charge represents a stop gap only and there needs to be a full shift towards direct road user charges.
The EV industry should be careful what it wishes for. Because if direct road user pricing came into effect that fully recovered the cost of road provision, then EVs would likely pay far more than 2c a kilometre.