Should Australia tax electric vehicles?

Two electric vehicle drivers from Victoria stated that being tax by their state’s government was in violation of Australia’s constitution since their state government did not have the authority to collect excise taxes on the consumption of commodities.

The impending electrification of road transportation is a challenge that is being faced by drivers, fleet managers, bus operators, logistics firms, transport agencies, car manufacturers, and governments at all levels.

On Wednesday, a landmark case demonstrated just how fragile the situation may be, resulting in a severe defeat for the government of Victoria, as well as any other state governments that are considering adopting road user tax for electric vehicles.

They claimed that this made the taxation of their vehicles unconstitutional. This will not only make it more difficult for Victoria to collect taxes of this kind, but it will also make it more difficult for other states and territories to follow Victoria’s lead. There may also be significant implications for other state-based taxes and the question of whether or not the states have the authority to collect these taxes under the constitution.

The Victorian government originally considered implementing road user charges in the year 2021. Since then, a number of other companies have stated that they intend to pursue the same course of action (although some of them have advocated beginning their efforts in a few years’ time or when an established number of new sales are electric).

The fundamental idea behind such a levy is that drivers of electric or plug-in hybrid vehicles would be subject to a cost that they will be required to pay on an annual basis for every kilometer that they travel in their vehicles. On the surface, these fees do not appear to be particularly high. The tax would be 2.8 cents per kilometer for fully electric vehicles and 2.3 cents for plug-in hybrids if it were implemented.

This would equal to a penalty of just less than $350 per year for the ordinary driver in Victoria, who logs an average of 12,400 kilometers per year on their vehicle. The purpose of these fees is to make up for the money that was lost as a result of a reduction in the amount of fuel excise duty that was collected from the sale of gasoline and diesel.

The fuel excise duty that motorists in Australia are required to pay was first implemented in 1929 as a flat rate per gallon of gasoline that was sold. This was a clever approach to charge motorists a reasonable amount based on how often they traveled and benefited from roads, thus it was implemented as a means of doing so.

The fuel tax in Australia is now set at 48.8 cents per liter, which generated $13.7 billion in revenue for the Australian government in the most recent fiscal year. On the other hand, the fuel tax has been a general revenue-raising tax ever since 1992, and it has no direct links to the amount of money that the Commonwealth makes available for funding roads. Even if all 20 million of Australia’s vehicles were electric tomorrow (which won’t happen for decades), the current fee would only generate $7 billion per year in revenue. If this financing deficit is to be covered, it appears that the price will eventually need to be increased by a factor of two.

Taxes play crucial role in ensuring smooth operation of any contemporary society by providing funds for essential aspects such as transportation systems, welfare and social services, educational institutions, and medical care. However, road tax enforced in this manner and directed on drivers of electric vehicles are not beneficial for either consumers or the nation’s goals of reducing carbon emissions from transportation.

The market for EVs is still in its infancy, and the industry needs assistance, not obstruction, in order to capture market share from vehicles that use more harmful fossil fuels. At the moment, transportation is the third worst source of carbon emissions, but it is projected to become the greatest source by the year 2030. EVs currently make up only 8% of new car sales; but, according to the EV Council, in order for us to have any chance of fulfilling our climate targets by this time, we will need to have electric vehicles make up 50% of all vehicles that roll off of forecourts.

The disparate approaches taken by states and territories have the potential to cause confusion among prospective customers of electric vehicles. They can have good intentions but become discouraged when they hear that state governments are offering financial incentives on the one hand, while at the same time they are imposing fees on the other. This could dissuade those who are thinking about switching from their present vehicle to an electric one, which would result in another sale of a vehicle powered by an the internal combustion engine and the emissions that come along with it over the following 15–20 years.

EVs are still more expensive than equivalent models powered by fossil fuels, there is a dearth of models that are less expensive, and there is no market for affordable pre-owned electric vehicles. The annual electric vehicle road tax of a few hundred dollars may not seem like much to more affluent drivers, but it will eventually matter to those who are more price sensitive. Again, those living in rural and distant locations, who have longer commutes and are more likely to require the usage of more rapid and costly chargers while they are on the move, would be disproportionately affected.

Uncertainty regarding charges may discourage individuals who are considering decarbonizing their private means of transportation, stall the electric vehicle industry, and discourage original equipment manufacturers from introducing their models to the Australian market in favor of countries in which incentives for EVs prevail over disincentives for EVs.

It also presents a chance to restart the discourse about how our nation’s transportation infrastructure ought to be supported in a more equitable manner. Something that is more unified and applicable across all jurisdictions, and which can also produce a transportation system that is more environmentally friendly and better for the nation as a whole.

The sooner we switch to using the sun as a source of energy for our transportation needs, whether it be for automobiles, bicycles, trains, or buses, the better.

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