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State Governments plan electric vehicle road tax

State Governments plan electric vehicle road tax

Two major states are working on introducing a tax on electric and other zero emission vehicles to subsidise road infrastructure, but industry groups warn it might affect the uptake of the nascent ‘green’ category.

South Australia’s Treasurer announced plans to introduce a tax on electric vehicles from the middle of next year, based on the distance they travel on the state’s road network.

“Electric vehicles do not attract fuel excise and therefore make a lower contribution to the cost of maintaining our road network,” Treasurer Rob Lucas said, in budget papers handed down on Tuesday.

“The proposed road user charge will address this inequity, ensuring that all vehicles make a contribution to the maintenance of our road network.”

Mr Lucas also announced an $18.3 million plan to help deliver a statewide charging network over four years.

The tax -- expected to be implemented on 1 July, 2021, provided legislation clears parliament -- is meant to offset the dwindling income government’s make from fuel excise.

Fuel excise is a 40 per cent tax charged on fuel sold at service stations. In the financial year ending in 2019, it generated $12.7 billion in revenue nationally, according to a NSW Government report.

New South Wales’ Treasurer Dominic Perrotet has since said a similar tax is likely to be introduced in the nation’s largest state.

“There is no doubt that as we increasingly transition to electric vehicles, we need to look at how all motorists pay a fair and equitable share for road usage,” he said, according to The Australian.

“You don’t want to stifle new technology, but on the other hand it’s hardly fair for tradies in utes to pay a tax that someone who can ­afford a $100,000 hi-tech car does not ... it’s something that I’d obviously want to take to cabinet within the next 12 months.”

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This’ll put people off ‘green’ transportation: Auto industry

The tax could scare potential buyers away, industry groups warned, as they pleaded to have it introduced once ‘green’ vehicles gained popularity.

The EV Council, the national body representing the electric vehicle market, said the tax defies conventional governance across the globe.

"No other jurisdiction in the world – aside from the South Australian Coalition Government this week – has thought it sensible to apply a special new tax to electric vehicles," Behyad Jafari said, chief executive of the EV Council.

There are some programs trialling the tax overseas -- generally in the USA. Oregon, California and Washington have piloted distance-based taxes, while it’s been introduced as a voluntary charge in Utah.

Still, Mr Jafari pointed to the environmental footprint of electric cars, and warned taxing too soon could throttle their widespread adoption.

“Burning less foreign oil in our cars is good for our city air, it's good for our health, it's good for our climate, and it's good for our economic sovereignty,” he said.

"If tax is dwindling from one area, governments don't have to make it up from that same area. That would be like whacking a new tax on nicotine gum because you're worried about a drop in the tobacco excise.”

Electric car adoption lags in comparison to other developed countries. An EV Council report released earlier this year said electric vehicles accounted for 0.6 per cent of all cars sold in 2019, where they make up 2.5 to 5 per cent of sales in other developed countries.

Mr Jafari blamed the slow uptake on the lack of charging infrastructure and initiatives introduced by state and federal governments, at the time.

"One day, when electric vehicles start becoming common place, the time may come to consider new taxes,” he said. “But at this point in our history, when we should be doing everything possible to encourage people to switch to electric vehicles, this tax would be pure poison.”

Electric vehicle sales are slowly growing even though overall car sales have dropped for a record 31 months straight, according to data from the Federal Chamber of Automotive Industries (FCAI), the group representing the automotive industry.

October sales doubled compared to the same month a year earlier, indicating Australians have a growing appetite for the new technology.

Whereas electric cars accounted for 0.6 per cent in 2019, the NSW Government forecasts they’ll account for 8 per cent by 2025. The Bureau of Infrastructure, Transport and Regional Economics predicts it’ll jump to 27 per cent in 2030 and 50 per cent by 2035.

The FCAI said the dwindling tax made from fuel deserves a “holistic discussion”, but they refuted the tax proposed on electric vehicles.

“All around the world, global automotive companies have invested billions of dollars to develop environmentally friendly vehicles,” Tony Webber said, chief executive of FCAI.

“And all around the world, progressive governments have supported the introduction of these vehicles.

“But here in Australia, we inhibit their introduction by levying extra charges on them.”

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This article was reviewed by Head of SEO Leigh Stark before it was published as part of RateCity's Fact Check process.

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