Car makers are calling for a single, unified road user charge to be rolled out across the country for all types of vehicles, a move they say would remove needless complexity, make new cars cheaper, and set up the Australian market for electrification.
The Federal Chamber of Automotive Industries, the lobby group for car manufacturers in Australia, says a single, simple road user charge should replace all other car taxes, including fuel excise, registration, stamp duty and luxury taxes.
The plan is laid out in a new discussion paper which the FCAI is pitching as the “start of the discussion”, aknowledging it will likely be a number of years before any major change occurs.
It follows the Victorian government’s controversial decision to introduce a road user charge on electric vehicles of 2.5 cents per kilometre. With other states also considering a road user charges for EVs, this is clearly an attempt on the part of the FCAI to push through a fundamental shift they have being discussing for some time.
While most talk to date has been about replacing fuel excise with a road user tax, the FCAI wants it to go further. If it replaced stamp duty, import duty and the luxury tax, it would significantly reduce the upfront cost of new vehicles of all types – obviously something that is very much in the interest of car manufacturers.
But the FCAI argues it would have the wider advantages, encouraging take up of new, cleaner cars with the associated envirionmental and health benefits.
“Our powered mobility options have been bound to the internal combustion engine for more than 100 years yet today we are witnessing technological advances such as electric and fuel cell technology that will set up society for the next hundred years,” FCAI chief executive Tony Weber said.
“The future of mobility is transforming rapidly. Against this revolution, now is the time to look ahead in the areas of regulation and funding and for governments to have the courage to overhaul outdated practices. Governments can develop new and certain revenue streams to pay for roads and infrastructure while vehicle owners will be relieved of a myriad of outdated, confusing and inefficient charges.”
The FCAI acknowledges that a nationwide road user charge would require a high degree of state and federal collaboration. The federal government controls fuel excise, luxury tax and import duties, while states levy stamp duty and registration, and none will want to give up the revenues they bring.
The big advantage of a road user charge would be that it could solve the problem of how to replace revenue from fuel excise when EVs come to dominate the roads. However, it would be much more difficult to implement than fuel excise, which is simply added to motorist’s bill whenever they fill up their tank, like GST.
But the FCAI says the technology used in new cars means a tax based on distance travelled would be much easier to implement now than it would have been a decade ago.
But the technology argument doesn’t help the problem of which level of government gets the revenue. At a rate of 43 cents a litre, fuel excise it is an extremely lucrative tax for the federal government, bringing in close to $20 billion in 2019. If states seize control of EV road use taxation, as Victoria has done, and electrification of transport takes off (which it must if the nationa any chance of reaching net zero) then the federal government stands to take a big hit.
This is something the Morrison government seems not to have thought much about, probably because it has displayed no interest in promoting EVs at all. But for a universal road user tax to work, fuel excise would presumably need to be scrapped to be politically saleable.
The Victorian government is so desperate to get control of EV road user charge – potentially worth about $1 billion a year by the end of the decade – it was willing to cop accusations of being the most anti-EV government in the world. So it is unlikely to consent to a road user tax that is federally collected.
“Having all states agree to a common approach is where the challenge would be,” Peter Griffin, the FCAI’s head of innovation and strategic engagement, told The Driven.
“Governments working together would be the ideal way to go. This is the start of the discussion and it’s going to run some time. But now is time to get it out on that eabtle and not get stuck with 1960s or 1970s taxation when we’ve got 21st century technology.”
Griffin said one feature of a road user charge is that it could be dialled up and down depending on where you live. This would answer complaints that it unfairly targets people in regional areas who have to travel long distances simply because of where they live – a particular concern if it replaced flat or one off taxes like registration and stamp duty.
It could also open the way to levy congestion charges in city centres, something that would appeal to city councils looking to reduce traffic.
James Fernyhough is a reporter at RenewEconomy and The Driven. He has worked at The Australian Financial Review and the Financial Times, and is interested in all things related to climate change and the transition to a low-carbon economy.