“Shameful”: Victoria follows South Australia and imposes electric car road tax

The Victorian Labor government has followed the example of the South Australia Liberal government and announced the imposition of an electric vehicle road tax from July next year.

The tax – to be imposed on a cents per kilometre basis, was annouced by Victoria treasurer Tim Pallas on Saturday afternoon, ahead of the state’s 2020/2021 budget on Tuesday. Victoria and South Australia are the only jurisdictions in the world to impose such a tax on EVs, without providing any meaningul incentive.

Victoria will impose the tax of 2.5c a kilometre for full electric vehicles, and 2 cents a kilometre for plug in hybrid vehicles. That translates to an annual tax of $500 for an electric car that travels 20,000kms a year, or an extra $400 a year tax for a plug in like the Mitsubishi Outlander. Victoria expects to raise around $30 million a year.

The move has been seen by some within the EV industry as a tax grab by the states, hoping to seize some direct revenue resources as the federal fuel excise tax depletes in future years if, and when, the uptake of EVs becomes a major part of the market.

Behyad Jafari, CEO of the Electric Vehicle Council, described the announcement as “shameful” and said he had repeatedly tried to obtain meetings with the Victoria government without success.

The announcements come in the same week that the UK announced it would ban the sale of new diesel and petrol cars by 2030, bringing the move forward from 2035 and 2040, with California following suit and the EU possibly bringing forward its proposed ban to 2025, as Norway is doing.

“I can’t begin to express how strange and disappointing this is from state governments,” Jafari said in a Tweet. “Having made no move to incentivise electric vehicles, they have waived the white flag on electrification and decarbonisation for a few measly bucks.

“(Selling EVs) is already a hard sell in Australia,” Jafari told The Driven. “We know customers are now cancelling orders on electric vehicles.”

In a later statement Jafari said:

“No other nation on Earth has thought it sensible to apply a special new tax to electric vehicles. It makes no sense to keep burning foreign oil that clogs our air with pollution. Why would we slow the transition to cleaner and healthier air by imposing a new and unnecessary tax? “

The EV industry accepts that a road user charge is inevitable as the car fleets transition to electric, but argue it should be introduced fairly and evenly. It points out the petrol excise goes into general revenue rather than road funding, and EV owners pay more tax than petrol car owners due to higher taxes from GST, stamp duty, and luxury car tax.

“This new tax is built on a myth. Fuel excise income is not quarantined for roads and will drop in the long run. But as we shift away from petrol and diesel, diseases linked to air pollution and other costs associated with climate change will also decrease,” Jafari said.

The most enthusiastic proponent of an EV tax has been the Infrastructure Partnerships Australia, which celebrated the “tax on millionaire” car drivers in a statement on Saturday.

“It is not fair right now that a family in a Mazda or a Kia is paying to use the roads while a millionaire in an elecgtric Tesla, Porsche or Jaguar gets a free ride,” said IPA CEO Adrian Dwyer, who wrote a thesis on road user chargers.

“Electric vehicles … don’t levitate, and they should be paying to use the roads like everyone else.”

Pallas echoed those comments, telling reporters on Saturday that it was not fair that “a tradie driving a Hilux ute” paid fuel excise, while those driving a Tesla avoid it because they do not use petrol.

The statement from the IPA is misleading on many fronts. It ignores the many people who have bought second hand Nissan Leafs for less than $20,000 and who are certainly not millionaires. And it ignores the millionaires in hybrid Lexus cars and the like that pay little in the way of fuel excise.

It is believed that the IPA, a “think tank” which represents big road builders and toll road operator such as Transurban, has been instrumental in lobbying the state government to push for the EV road tax.

It was thought that NSW was also going to introduce an EV tax in its budget, but it baulked and Treasurer Dom Perrottet only talked of taking a proposal to Cabinet in the next 12 months. It may have been spooked by the furious response to the South Australia move to its EV tax, and its likely defeat in state parliament after it was opposed by state Labor, the Greens and independents.

Jafari says that he was told multiple times in the past 12 months by the Victorian treasury when seeking a meeting with the treasurer that electric vehicles were not a priority, and says the announcement of a tax shows a lack of understanding about the role electric vehicles can play in reducing emissions.

“States are already not on track to meet carbon emissions reduction in the transport sector, which is the second biggest producer of emissions,” says Jafari. “They’re not going to achieve net zero emissions, and they’ve made that clear today.”

By introducing a cents per kilometre road usage fee, as in South Australia, would mean the Victorian government would bypass the federal fuel excise. But with only 20,000 or so electric vehicles on Australian roads, and perhaps a quarter of these in Victoria, the pickings will be slim.

“They think in the long term it’s a way to take road excise away from federal government, but there is no regard for what this will do for states’ ability to reduce carbon emissions and increase EV uptake,” says Jafari.

The Electric Vehicle Council has issued reports that highlight the financial, environmental and health benefits that electric vehicles can contribute to the economy and society, and states have done their own research with the same results.

The outlook for electric vehicles at a federal level is even more perplexing. While a federal EV strategy was expected to be released in mid-2020, 18 months after the findings of an EV senate enquiry were released in 2019, there is still no sign of it as 2020 reaches an end.

Word is that may now be put off until early 2021, but as with state zero emissions roadmaps it will likely only include charging infrastructure investments, says Jafari.

Jafari says consumers will ultimately make choices to buy electric vehicles if there are incentives to do so – such as in the ACT which has just introduced free registration and a zero interest loan to encourage uptake.

“They’re turning down the dialogue,” says Jafari of the federal and state governments. “Customers don’t walk around thinking about infrastructure [that is somewhere they cannot see] – it’s the money that’s what is in their wallets that matters.”

See also: Australia’s carbon twist: Taxing consumers who refuse to burn fossil fuels

Note: The Driven will be hosting a free webinar this coming Wednesday on charging options at home and on the road. To find out more and to register, please click here.