Electric vehicle tax is bad policy, denies reality

Denham Sadler
National Affairs Editor

A new tax in Victoria on the use of electric vehicles is a bad policy that will disincentive use of the technology and put Australia even further behind the rest of the world, according to Australia Institute chief economist Dr Richard Denniss.

The Victorian government announced plans last week to introduce a road tax for users of electric vehicles from July next year. The tax will be calculated on a cents per kilometre basis, with a tax of 2.5c/km for full electric vehicles and 2c/km for plug-in hybrid vehicles.

The state government expects to raise $30 million per year thanks to this new tax.

It comes just after the South Australian government announced its own plan for an electric vehicle road tax, and the New South Wales government also confirmed it was considering something similar.

Electric dreams: The tax on electric vehicle is counterproductive

The new tax has been widely criticised by electric vehicle industry groups and climate change advocates, with arguments it will disincentive the use of electric vehicles and with a lack of a coherent national policy in the space, put Australia even further beyond the rest of the world on the technology.

In an Australia Institute webinar on Wednesday morning, Dr Denniss said the new tax is bad policy that will severely damage the burgeoning electric vehicle sector.

“This is a symbolic act that will have a very big detrimental impact on a very small part of the market. If we’re last to the party it’ll mean vehicles in Australia are more expensive, more polluting and it’ll take us longer to catch up,” Dr Denniss said.

“Most of the world is embracing the future while Australia is trying to hold back the tide with a broom. It won’t work but we will waste a lot of time, money and effort, and we will miss out on a lot of opportunities to participate in one of the biggest shifts in the economy this century. We’re missing out by denying reality.”

The tax will mean less Australians are likely to purchase electric vehicles and damage local companies operating in the space, Audrey Quickie chair and JET Charge founder Tim Washington said.

“It disincentives electric vehicle uptake. Nobody likes to pay more for things, and people don’t like the hassle, especially when an equivalent thing can be done with less hassle,” Mr Washington said.

“If someone is shopping for an electric vehicle, the fact that it’s more expensive already, then you have to pay for a road usage charge and then you have to report the odometer measure or have GPS tracking, that extra administration really hurts.

“In a country where we are already struggling with model availability, this sends a signal to vehicle manufacturers globally that Australia is not a good place to send your vehicles, especially when they sell it so much easier in almost any other developed jurisdiction.”

In announcing the new policy, Treasurer Tim Pallas said “appropriate arrangements” need to be in place for the growth of electric vehicles.

“We need to recognise we have to put in place appropriate arrangements as we move to more electric vehicles and low-emissions vehicles on the network,” Mr Pallas said.

This week’s state budget said the revenue from the new tax will fund initiatives including a “smart, clean electric vehicle transport network”, such as fast-charging networks on major highways and tourist destinations, and the development of a business case for procurement of zero-emission vehicles for the Victorian government fleet.

But the argument that the existing fuel excise pays for road maintenance and electric vehicles should also contribute is an “absolute lie”, Mr Washington said.

“I can’t believe they are getting away with it. We need to break that link because it simply does not exist,” he said.

Dr Denniss agreed with this, and said heavy trucks travelling large distances should be charged more instead.

“There is absolutely no link between how much you drive your car and how much excise you pay and how much the government spends on a road anywhere. This idea that the excise pays for roads is simply not true,” he said.

Australia Institute climate and energy researcher Audrey Quickie said other countries are approaching the concept of an electric vehicle road usage charge more effectively.

“Norway is looking at the idea that a road user charge should vary based on environmental footprint, how heavy the vehicle is, where it’s driving and the time it’s driving. What we’re seeing here doesn’t address these external costs, it does the opposite by singling out clean vehicles and taxing them,” Ms Quickie said.

“Road user charges should reflect the external costs of that car being on the road network.”

These ad hoc policies from state governments are partly the result of Australia having no policies around electric vehicles at a federal level, Australia Institute climate and energy program director Richie Merzian said.

“There is no national electric vehicles policy – we’re still waiting on a national electric vehicles policy. They’re looking to tax now when they’re small and weak because it might be hard to tax them later when they’re more powerful. But we’re taxing something that we want,” Mr Merzian said.

There is set to be a significant campaign against the proposed taxes in South Australia and Victoria.

“They think this is the path of least resistance, and we need to show them that there is going to be resistance to this path,” Mr Washington said.

Do you know more? Contact James Riley via Email.

1 Comment
  1. anonymous 3 years ago

    There’s zero justification for opposing modest road user charges on electric cars. The proposed rate appears to work out at less than half the equivalent amount now levied on motor vehicles through the fuel tax component.

    Electric cars are massively subsidised in many ways already, and there’s no (real) reason why they should be exempt from making a reasonable contribution to better roads.

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