This latest decision by Victoria, to discriminate against zero-emission vehicles and add further taxation layers to an already overtaxed transportation system in desperate need of an overhaul, is an embarrassment for the whole country.
In case you haven’t heard, Victoria has become the first state to introduce a tax on electric, hydrogen and plug-in hybrid electric vehicles (PHEV).
From July 1, electric and hydrogen vehicles will be slugged 2.5 cents per kilometre by the Victorian state government. PHEVs will be hit with 2.0c/km. This means Victorians driving EVs or hydrogen cars on Australian roads for the national average of 15,000km per year will pay an additional $375 annually for the privilege. Victorian PHEV owners will pay an extra $300 per year on top of the 42.7 cents fuel excise for every litre of fuel they buy.
The fees will be collected at registration renewal time and are expected to add $30 million to the government’s coffers over four years.
“You’ll be able to take a photograph of your odometer and then download it onto the VicRoads site,” Treasurer Tim Pallas said on Wednesday.
The message sent by this ill-conceived EV user tax is that we are a nation motivated by mindless money-grabbers rather than quality of life and leadership. Our politicians should instead be using this opportunity to overhaul the cumbersome car purchase/ownership taxation system to prepare for the future we need, not add yet another tax to a tax on a tax.
Australian new car buyers are already hit with up to seven additional state and federal charges to buy and drive cars: Stamp duty, customs duty, import tariffs, GST, luxury car tax, fuel excise, CTP, and now this. It’s a bad joke that will do little beyond discouraging the take-up of zero-emission vehicles.
What we needed instead was an example of true leadership from our politicians, not this knee-jerk money-grab. Ultimately, a pay-per-use system is fair, but this is not it.
Any argument that this is about balancing the burden of road construction and maintenance between EV drivers and internal combustion vehicle drivers is deeply flawed.
Yes, non-EV drivers pay an excise of 42.7 cents per litre of fuel at the bowser, but that doesn’t directly equate to a user pays tax. Some cars need five litres to drive 100km, others need 15 litres. So is it fair that some drivers make triple the ‘road maintenance’ contribution compared to others? Of course not. So how is introducing yet another unfair tax somehow being held up as an example of equality?
Let’s also remember that every dollar of fuel excise revenue does not equal a dollar spent building new roads or maintaining existing ones. Firstly, fuel excise goes into Federal coffers, whereas this new EV user tax goes into Victorian state coffers.
Secondly, Federal budget figures confirm that only a quarter of the $20 billion annual fuel excise revenue finds its way back into Federally-supported road transport initiatives. That portion will only get smaller as fuel excise revenue dwindles as more Australians embrace EVs. So, this new state tax doesn’t fix this either. It just hastens the day when the Federal Government stops supporting land transport infrastructure.
This tax also doesn’t take into account higher GST payments at a user level by EV drivers.
EV owners who charge their cars via the grid pay more for electricity and therefore more GST on that electricity, while EV owners who install solar arrays pay GST on the purchase and installation. Neither of those taxes goes back into road maintenance. All this EV user tax does is discourage EV owners from making those investments in a cleaner energy future that also reduces the load on our ageing power grid.
Okay, let’s play devil’s advocate here and pretend we support this idiotic decision.
Victoria’s EV fleet is tiny, so revenue from this initiative is but a drop in the ocean ($7.5 million per year according to Treasurer Pallas). Even if uptake increases an astonishing 100-fold in the next 10 years, we’re only collecting $750 million against a current fuel excise revenue of $13 billion. I hope you don’t mind driving through potholes, because if that’s our road maintenance fund then there’s about to be a whole lot more of those on our roads.
Victoria’s backwards step comes just one day after the ACT further bolstered its claim as Australia’s most EV-friendly state by giving two years' free registration to all new and used EVs purchased by the end of 2024. This is in addition to existing measures such as waiving stamp duty on EVs and offering a means-tested interest-free loan of up to $15,000 towards the purchase of a new or used EV.
Meanwhile, South Australia, which had also proposed a user charge on electric cars, stepped back from that in March, saying it would monitor similar measures in other states before making a decision.
The Victorian Government’s latest move also contradicts previous initiatives supporting EV take-up, such as the $100 registration rebate for EV and hybrids.
In May, the Andrews government also launched the first phase of a $100 million program to get an additional 20,000 zero-emission vehicles on the State’s roads by 2030. The program’s first-round offers a $3000 subsidy for the first 4000 EV buyers. But while this subsidy will eventually end, the insidious EV road user tax will not.
This tax, combined with Australia’s regulatory foot-dragging on emissions standards, puts us even more at risk of becoming an automotive third world. Australia is not expected to step up to Euro 6 emissions standards until 2027, putting us 12 years behind Europe which has been there since 2015, and moves to Euro 7 in 2025.
"First world markets – where there are significant penalties for failing to meet emissions targets – will naturally be the first in line for zero-emission vehicles,” a Volkswagen spokesman told CarAdvice in March. The message is clear, we are at risk of missing out on the latest EVs and becoming a dumping ground for old tech.
So, massively flawed, right?
Let’s now put ourselves in the legislators’ shoes. Here’s our bare-bones proposal for a system to replace the Seven Steps of Taxation Hell we currently have.
In our opinion, a fair system would be based around a vehicle’s impact on the roads system, not on a combination of registration and fuel usage like the current system. Instead, let’s use GVM and distance travelled to calculate vehicle registration fees, which we’re renaming Roads Contribution because that is what it is. If you drive a heavy car, you pay more. If you drive more kilometres, you pay more.
Just like rego, the Roads Contribution is collected annually for the year ahead when your odometer is checked as part of a new annual roadworthy check that we’re also implementing. Any discrepancy between what you paid and what you used is charged on top or refunded as necessary.
In an ideal world, our Roads Contribution scheme would be implemented at a Federal level, not state by state, just like the ADRs. Each state would get a portion of the revenue based on the size of their vehicle fleet and road network and be required to put at least 90 per cent of that into maintaining the road network.
Do you like our solution? Or maybe you have a better one?
Let’s hear it in the comments below and show our politicians that real Australians can find a smarter solution than the one they’ve come up with.