Australia’s leading business group has called for a moratorium on electric vehicle taxes, warning that the extra costs will deter consumers from purchasing cleaner vehicles and curb government and industry efforts to reach net zero emissions targets.
The Australian Industry Group has effectively pitted itself against the Victorian Labor government, which last month introduced legislation to parliament to impose a tax on electric cars and other zero-emissions vehicles.
Innes Willox, chief executive of AIG, representing more than 60,000 businesses, said these taxes were like “putting the cart before the horse and should not be implemented until clean vehicles are better established and the taxes are better designed”.
“Road infrastructure needs to be paid for and it will be important in the long term to maintain the tax base as batteries and fuel cells replace petrol tanks in Australia’s vehicle fleet,” Willox said.
“But Australia is currently well behind our peers in that transition. Our slow uptake of clean vehicles is holding back national progress towards emissions targets – and increasing the pressure on every other part of the economy to deliver cuts.
The AIG climate and energy advisor, Tennant Reed, told the Guardian that AIG came to the position after receiving feedback from its energy and climate leaders group and electric vehicles working group, which includes transport businesses, electrical equipment suppliers and property managers.
“We’ve had feedback from businesses who want it to be easier to access cleaner vehicles to meet their own emissions reduction commitments and businesses who are hoping to supply the infrastructure to support EVs … but this goes not just to how members meet their own targets, but how successfully economy-wide targets are going to be able to be pursued,” Reed said.
The bill currently before the Victorian government would introduce a per-kilometre road tax for electric vehicle and other emissions vehicle users. If passed, starting in 1 July 2021, a 2.5 cent/km charge will apply to electric and zero emission vehicles, and a 2.0 cent/km charge to plug-in hybrid-electric vehicles.
The justification for this is because EV owners miss out on paying a fuel tax plus GST on petrol, diesel and gas that other vehicle owners pay, and the state wants to find some way to recoup that loss.
Electric vehicle owners would, on average, end up paying an extra $330 a year, compared with other motorists, who pay almost $600 a year in fuel taxes, according to the state government’s calculations.
The Victorian treasurer, Tim Pallas, the driving force behind the legislation, said “these reforms are about ensuring 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 increase 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.”
But Behyad Jafari, CEO of the Electric Vehicle Council, told the Guardian that EV motorists already paid higher taxes than other drivers as part of the upfront vehicle costs, such as GST, stamp duty and registration.
“An electric vehicle costs, on average, more than a petrol and diesel one … And so the taxes that you pay apply to that upfront cost, which means that electric vehicles are already relatively paying much more in tax than a petrol vehicle.
“The Victorian government is unique right around the world in saying that we actually want to add a new tax on to electric vehicles, whereas what we have in most of the world is places saying we actually want to exempt electric vehicles from taxes, because at this early stage, we want to help people choose to buy one, as opposed to buying a very heavily polluting petrol or diesel car.”
A Electric Vehicle Council analysis found that every driver who switches to an electric vehicle delivers a $8,763 boost to the Australian economy over a 10-year lifespan, including a $1,370 benefit to government revenue. Not only do electric vehicle drivers pay additional taxes upfront, but contribute to the economy by lowering pollution and boosting respiratory health, the analysis found.
The South Australian government has put a hold on its plans for an electric vehicle charge. Meanwhile, the ACT has categorically rejected the idea, and Tasmania and Western Australia have confirmed they have no plans for one on the horizon. New South Wales has publicly floated an EV road user tax, with the treasurer Dominic Perrottet having flagged taking a plan to cabinet this year.
The Guardian revealed last December that Australian states were warned a road user tax on clean cars introduced without other support for the technology could discourage its uptake and impede greenhouse gas cuts.
Written by the Victorian Treasury, the report argued a new form of charge was warranted as the rise of cleaner cars would reduce revenue from fuel excise paid on petrol and diesel, which it described as a “proxy charge” on road use.
But the report also found that a road user tax without new incentives to make EVs more attractive could discourage EV uptake, slow emissions cuts and potentially skew the market towards fuel-efficient fossil fuel cars.
A separate analysis by Dr Jake Whitehead from the University of Queensland found Victoria’s policy could lead to EVs having a 25% lower share of new sales in 2050 than otherwise expected.
Pallas said the state government was trying to incentivise EV uptake with discounted vehicle registration fees and stamp duty concessions.
Meanwhile, the Greens have introduced a private members bill in federal parliament to penalise states that tax electric vehicles, and redistributing that money to other states that do not have any discriminatory electric vehicle taxes or charges. The bill is currently before the economics committee and a public hearing is scheduled for 22 April.
The Greens spokesperson for electric vehicles, Janet Rice, said she was hopeful other parties will come to the table and oppose states from disincentivising electric vehicle adoption.
“Governments should be phasing out the internal combustion engine, not putting taxes on its cleaner competitors,” she said.