To tax or not to tax EVs

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Carrington Clarke (0:36)

The surge in electric vehicle sales appears here to stay as Australians look for alternatives to petrol-powered cars, and the global energy crisis pushes prices at the bowser higher still. But with fewer drivers paying the fuel excise, what does it mean for government revenue? And what are the economics behind taxing vehicles on our roads? Welcome to ABC Business Daily.

I'm Carrington Clarke.

Amy Tramontozzi (1:03)

And I'm Amy Tramontozzi, economist with the e61 Institute.

Carrington Clarke (1:06)

Amy, thank you so much for joining us. We've been talking a fair bit about the transition to electric vehicles throughout this energy crisis. Really, it's taken off quite extraordinarily. The number now being bandied around is an electric vehicle is being sold every 100 seconds in Australia. A huge increase in the percentage of vehicles sold that are electric vehicles. You've done a piece of research for e61 looking at potentially different ways of trying to get people who are using electric vehicles, people who buy them, to pay tax for utilising our roads, because they're not paying, obviously, the excise when it comes to petrol.

Talk us through why you decided to do this piece of research, and then the questions that you were trying to answer.

Amy Tramontozzi (1:51)

Sure. So in general, the fuel excise was largely motivated in order to provide the roads, as well as just the general upkeep that's required with them. And so you're right in saying that as more drivers are switching to EVs and hybrids, they are going to buy less fuel and then pay less excise. But we still do really need all of that revenue in order to continue to maintain and provide the roads. Many state governments have been floating with the idea of road user charge, and that would look like a flat rate per kilometre driven, and in that sense, EV drivers would now be able to contribute.

Carrington Clarke (2:26)

Why would it be done at the state level as opposed to the federal level? Because at the moment, the fuel excise is paid at the federal level, though a lot of the road maintenance obviously falls upon individual state governments. So do you have a position on whether or not this would be better to be a national answer or a state response, and would there be different rates depending on which state you're in?

Amy Tramontozzi (2:47)

So this isn't something that we directly looked at in the piece. From my understanding, it's just a little bit politically harder to get something like this at the national level. You have New South Wales proposal going into place next year, and then you also had the High Court in Victoria striking down the road user charge proposal. So I think what it comes down to is that political motivation.

Carrington Clarke (3:05)

So one of the counterpoints from the electric vehicle lobby group, those representing electric vehicle owners, is that at the moment, it's still a pretty new transition that's occurring, and they don't want to do anything that potentially makes getting an electric vehicle not as positive. At the moment, we have all these tax concessions to allow people to purchase electric vehicles. And so is the concern that if you did this transition too early, then suddenly they're less attractive and we don't get as many vehicles being bought?

Or is the danger on the other side, which is if you don't implement something soon, then people will get used to a status quo where they're not contributing to road usage. Do you have an opinion on that?

Amy Tramontozzi (3:47)

Yeah. So that's something that we're touching on towards the end of the piece. I definitely have the opinion that it's more of the latter in terms of these drivers getting used to the status quo and then it being harder to actually enforce policy later on. We've previously estimated that EV drivers save about $1,000 annually, just because they're not paying for petrol. We also estimated that a road user charge would be costing the average driver $673 a year. Then like you mentioned, you already have these policies at different levels of government, like the fringe benefits tax exemption.