“Tax on clean air:” Victoria wants EV road tax in place by July

The Victorian Labor state government said it would introduce legislation into state parliament today that would force drivers of battery electric, plug-in hybrid and hydrogen vehicles to pay a road user tax worth on average $330 a year.

If passed by both houses, the controversial tax – which has been criticised as a perverse disincentive that would further stall development of the local EV market – would come into effect on July 1.

Under the proposed legislation, battery electric vehicles would have to pay a tax of 2.5 cents for every kilometre they drive, while plug-in hybrid vehicles would have to pay  2 cent per kilometre, even if they are burning fuel. Mild hybrids, which charge themselves rather than plugging to an external power source, are exempt from the charge altogether.

The Andrews government justifies the tax on the grounds that currently EV drivers pay no fuel excise. It calculates that the tax will cost the average battery EV driver $330 a year, and the average plug-in hybrid driver $260 a year (plus the excise on however much fuel they consume.

By contrast, it claims the average internal combustion enginge vehicle driver pays around $600 a year in fuel excise – though it does not detail how it came to that figure, and had not responded to a request for more information at time of publication.

The Driven’s calculations, however, show that the government’s figures are based on petrol and diesel cars consuming 10.5 litres for every 100kms. Most car consume much less than that so likely pay only between $300 and $400, while hybrids would pay considerably less.

The law’s passage through parliament is far from guaranteed. While Labor has a huge majority in the lower house, it is three seats short of a majority in the 40-seat upper house. The Liberals have 10 seats, plus one National, with the balance of power held by an assortment of 11 minor parties and independents, many of which have said they would vote against the bill.

The Liberal opposition has also said it will oppose the bill, with leader Michael O’Brien saying  it is “bad economics and … bad for the environment”. Labor will therefore need to persuade at least three crossbenchers to vote in favour.

Greens upper house MP Samantha Ratnam is one of those that will vote against the bill. The Victorian Greens’ transport spokesperson Sam Hibbins called on all cross bench MPs to block what he called a “tax on clean air”.

“It’s outrageous that Labor want to be the only government in the world making electric vehicles more expensive.

“We’re in a climate crisis and transport is the fastest growing source of greenhouse gas emissions in Victoria. We should be helping people make the switch to EVs by making them more affordable instead of putting up roadblocks.”

Victorian Treasurer Tim Pallas used the equity argument on Monday, saying: “These reforms ensure all motorists pay their fair share to use our roads while we continue to incentivise the use of zero or low emissions vehicles.”

“Introducing a road usage charge now, before take-up increases substantially, ensures that everybody pays a fair and sustainable charge for the use and the wear and tear on our road network and that means safer roads,” he said.

Many commentators behind the scenes say the Andrews government is trying to do this now while the federal government, a notorious laggard on EV policy, is looking the other way, and before the EV lobby becomes too powerful.

If successful, it would give the state government control of a potentially highly lucractive new tax revenue stream, potentilly bring in as much as $1 billion a year by the end of the decade according to the Electric Vehicles Council. Fuel excise by contrast, is collected by the federal government.

Behyad Jaffari, chief executive of the Electric Vehicles Council, said the industry accepted that a road user tax would eventually be required, but to bring it in now was premature.

“It’s something governments should look at after adoption of EVs has been more succesful. Priority should be to make them more affordable, not more expensive.”

He said the EVC would be lobby crossbenchers to block the bill unless the government couples it with incentives to reduce the upfront cost of EVs – either through tax breaks or grants, or a mix of both.

EY released a report last year, commissioned by the Electric Vehicles Council, that found when you add up the amount EV users pay in GST and stamp duty, they actually pay more than ICE drivers even when you include fuel exise. That’s simply because the high cost of EVs in Australia means taxes based on percentages, like GST and stamp duty, are higher.

Both the South Australian and New South Wales Liberal state governments have also said they will introduce some sort of road user charge for EVs. However, the SA government – which had been planning to legislate this year – has said it will delay until after the next state election. Jaffari praised the NSW government for opting to consult stakeholders, including the EVC, before releasing any legislation, something he says the Victorian government did not do.

Across the nation last year, 6,900 electric cars sold in Australia, a 2.7 per cent increase from the previous year. That accounted for 0.7 per cent of total Australian car sales, a stark contrast with Europe and the UK, where EVs now make up more than 10 per cent of new sales.