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Road Use Tax Response to Rising EV Demand

Road Use Tax Response to Rising EV Demand

(1 August 2018 - Australia) The number of electric vehicles (EVs) in Australia has increased by 160 percent in the past five years, raising doubts about a core element of the tax base being stripped back over the next ten years without significant public and private sector intervention. 

Technological change has negatively impacted the A$12.4 billion per annum fuel tax, used to fund road maintenance and incurred for by motorists every time they refuel their petrol motor vehicle. The motor vehicle census, released on Friday by the Australian Bureau of Statistics (ABS), reveals that the number of electric cars registered has increased by 159.2 percent to 8334 between 2013 and 2018, while there are now more than 200,000 cars in dual-fuel category which includes petrol-electric hybrids. A prevailing view by EV owners  is that they should not be punished more than the extra investment already required given Tesla’s and other luxury cars valued over A$65,000 are subject to a 33 percent luxury car tax. Independent Senator Tim Storer, the chair of the Senate committee on EVs, warned Australia would become a dumping ground for less efficient, increasingly expensive cars if it did not foster an environment that encouraged EVs. But he said the hole in the tax base created by evaporating fuel excise needed to be closed. "We need to address this before this influence of electric and more fuel efficient vehicles creates a larger problem."

Shadow Treasurer Chris Bowen confirmed Labor had no plans for road user pricing. "Clearly, as the likes of Infrastructure Australia and the Parliamentary Budget Office have pointed out, technological changes mean that this area of the tax base and reform will need to be examined in the next decade or so". A spokesman for the Department of Infrastructure said EV sales represent 0.2 percent of new vehicle sales. "It is sensible for governments to consider whether current arrangements for the provision of road services will be equitable and sustainable in the long term. Any move to implement change, including road user charging, would be a ten year journey and would only go ahead if governments were confident that the benefits to the community of any new arrangements outweighed the costs."

Infrastructure Partnerships Australia CEO Adrian Dwyer will make a submission to a Senate inquiry next week calling for a road use charge to be levied on motorists. The tax could replace fuel excise by up-loading the number of kilometres a car does to the internet. Motorists would pay the tax on the kilometres they have driven when their car is serviced, hitting more frequent drivers with a higher share of the tax burden. Mr. Dwyer stated “Now is the time to implement a road use charge on EVs. By 2030 revenue will be entirely undermined and it will just be politically too difficult to introduce this reform. You have to look at the thin edge of the wedge, if you have 100,000 vehicles on the road you have a whole new constituency to deal with. Right now a driver of a A$130,000 Tesla is not paying for the use of the roads when someone in a 10-year old Holden Commodore is”. The new ABS figures also reveal the types of cars registered in each suburb. Crows Nest in Sydney's north shore has the highest concentration of electric powered Teslas with 30, followed by Brisbane City and Bellevue Hill. Melbourne’s Toorak is home to the largest collection of Ferraris in Australia, with 65, closely followed by the Sydney CBD.

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