Why Is The Victorian Government Going Ahead With This Much-Hated EV Tax Anyway?

Why Is The Victorian Government Going Ahead With This Much-Hated EV Tax Anyway?

The Australian Industry Group (AIG) has called for a moratorium on the electric vehicle (EV) taxes that are set to be imposed in Victoria on July 1, asserting that the extra taxes will be detrimental to the future of EVs in Australia.

AIG CEO is not happy about the Victorian EV taxes

AIG chief executive Innes Willox has slammed the proposal, suggesting the new 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 on Monday.

“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 bill currently before the Victorian government seeks to introduce a per-kilometre tax for EVs in the state. If passed, electric and zero-emission vehicle owners will be slapped with a 2.5 cent/km charge, while plug-in hybrid-vehicle owners will pay 2 cents/km.

In total, the Victorian government estimates this will cost drivers an extra $330 per year, compared to the average of $600 spent on fuel taxes per year.

The tax is expected to raise over $30 million over four years.

The taxes will go towards road upkeep

Victorian treasurer Tim Pallas – the man behind the proposed new legislation – justified the new taxes as a way to recoup the loss in tax revenue from EV owners not purchasing fuel.

“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,” he said.

“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.”

Additionally, the Victorian government expects electric cars to reach price parity with combustion vehicles by the middle of the decade and notes this as a reason for the new tax. However, it’s worth noting that even the cheapest EV in Australia will still set you back over $40,000 right now.

“Electric cars are expected to reach price parity with internal combustion vehicles by the mid 2020s and are destined to dominate our motorways in the future, given they’ll always be more economical to run,” a spokesperson told Gizmodo.

The initiative has been welcomed by Victoria’s RACV’s senior engineer vehicles, Nicholas Platt, who is in favour of a user-pays system.

“As the number of zero-emissions cars on our roads continues to grow, the EV tax will make up for lost fuel excise, so authorities can continue to fund and maintain Victoria’s roads,” he said.

“RACV has long advocated for a fairer, more efficient and transparent user-pays system to replace the current network of state and federal taxes.”

There are obviously two sides to the argument, and it’s worth noting that EV users should be contributing to the upkeep of roads.

But considering there are few state and no federal incentives for owning an EV in Australia, the timing of the tax feels particularly jarring.

There’s still backlash thanks to lack of EV subsidies in Australia

Unsurprisingly, the proposal has faced backlash from more than just the AIG.

Electric Vehicles Council chief executive Behyad Jaffari accepts the notion that a road usage tax will need to be implemented but believes this should be done after we see a significant increase in EV ownership in Australia.

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

Jaffari’s criticism comes after a report commissioned by the EVC found that, due to the higher cost of electric vehicles, these drivers actually pay more in percentage-based taxes like stamp duty and GST.

Similarly, Victorian Greens spokesperson for transport Sam Hibbins told Gizmodo Australia the EV tax is “illogical and harmful.”

“Transport is the biggest growing source of carbon emissions in Victoria, making Victorian Labor’s EV tax illogical and harmful to our environment,” Hibbins said, confirming that the Victorian Greens will vote against the tax.

“Governments around the world are making electric vehicles more affordable, yet the Victorian Labor wants to be the only government in the world making electric vehicles even more expensive.”

The news comes after polling by the Australian Institute found 62 per cent of Australians agree that the government should introduce subsidies for buying electric vehicles, rather than increase taxes for them.

“The majority of Australians actually want incentives to drive the uptake of zero-emissions vehicles higher,” the Australia Institute’s Richie Merzian said when the proposal was first announced last month.

As it currently stands, the transport sector is responsible for 18 per cent of Australia’s total greenhouse gas emissions, with that number expected to rise over the next decade.

Meanwhile, EVs make up just 0.2 per cent of Australia’s total vehicle fleet, which begs the question: shouldn’t we be incentivising this, rather than using it as a cash-grab?

The Victorian government offered the following statement when approached by Gizmodo for comment:

“We’re continuing to back the take-up of electric vehicles as we move closer to net zero emissions by 2050. We are providing confidence to new electric vehicle owners with a massive boost to our charging network, funded by the distance-based charge, which will reduce range anxiety as a key barrier to take-up.”

“We’re also encouraging the uptake of zero and low emission vehicles including with discounted vehicle registration fees and stamp duty concessions and investing in fast charging networks for motorists across major highways and tourism destinations.”