Are electric vehicles a drain on government tax revenue? It’s an important question because the general assumption is that yes, they are, and that idea is being used by some lobbyists pushing for a “road user” tax on EVs to “plug the hole” in revenue from petrol excise.
A new report from accounting giant EY, however, says the idea that EVs are a drain on government taxes is wrong. In fact, the new report argues, replacing a petrol of diesel car with an EV will deliver a $1,370 benefit to government revenues, and an $8,763 net benefit to the economy over a ten-year life span.
The analysis shows the average Australian electric vehicle driver already pays more tax (spread across federal and state charges) than a combustion engine driver, despite obviously saving on fuel excise. And they deliver significant benefits to the economy by cutting pollution, both greenhouse and other noxious tailpipe emissions.
While revenue from fuel excise is lost, this is more than offset by increases in GST, luxury car tax, stamp duty and registration. There is also a small saving from the strategic fuel reserve because of lower fuel imports, even if the federal government didn’t even mention EVs when it recently announced plans to spend more than $200 million on refineries.
But the biggest savings comes from “external” factors, including greenhouse gas pollution, local air pollution and noise pollution. Added up, if a quarter of Australia’s fleet was converted to electric, it would generate an economic benefit of $4.4 billion a year.
“You often hear this idea that when someone replaces their petrol engine vehicle with an electric car they reduce their tax, because they don’t pay the fuel excise anymore,” Electric Vehicle Council chief executive Behyad Jafari said .
“This analysis blows that argument out of the water.”
There has been a concerted push by some lobby groups for governments to slap a “road tax” on EVs, arguing that the electric vehicles don’t pay their fair share of petrol excise, which currently bring in about $20 billion a year (just over $12 billion after rebates).
This ignores the reduced fuel consumption in cars generally, and for hybrids in particular. The EV lobby is not opposed to road taxes per se, but says that applying them now to EVs only would amount to a tax on EVs at a time when the rest of the world is providing incentives.
Still, some governments have been asked to consider it, and a NSW state government financial review panel has recommended a road user charging scheme for electric vehicles.
“Instead toying with the idea of punishing people for buying electric vehicles by charging them additional taxes, the rational thing for government to do would be pull out all stops to encourage transport electrification,” Jafari says.
“But slamming the brakes on electric vehicles, when they are capable of delivering so much economic benefit, would be extremely stupid policy.”
Jafari says the research is important because it confirms what many have said consistently over the last year or so, and he believes that governments now understand this issue.
Dr Matthew Bell, the head of EY’s Asia Pacific climate change and sustainability practice, says the findings should be an eye opening for pleader Dr Matthew Bell said the report should be an eye opener for lawmakers.
“Our analysis shows the significant value that electric vehicles can create for Australia, including to government,” Dr Bell said.
“What will be lost in fuel excise and GST revenue is more than made up for in savings on strategic fuel reserves leasing and the significant health and environmental benefits.”
“Climate change is having, and will continue to have, a transformative impact on all Australians. Our analysis shows that the move toward electric vehicles creates a benefit over and above the reductions in greenhouse gas emissions.
Note: The government revenue effects were calculated using a high case comparision between the Audi Q8 quattro and the E-tron 55 quattro, and the low case between a Toyota Corolla and a Nissan Leaf, both in NSW.