Electric Vehicle Tax: Paying for Road Use

Fuel tank

Both South Australia and Victoria will introduce an electric vehicle tax to offset reduced revenue from fuel excise. As electric and low emission vehicles reduce the revenue collected from fuel excise Australia needs to adjust how it funds transport projects.

It is for this reason that NatRoad joins the Australian Automobile Association (AAA) in its call for a national tax on electric vehicles.  We propose the introduction of  a national tax on electric vehicles as an interim measure, until  the model for funding roads is updated to reflect the introduction of electric vehicles and the reduced tax base represented by declining fuel excise. A survey conducted by the AAA this month found that 80 per cent of respondents agreed owners of electric vehicles should contribute towards the costs of roads in some way.

At present, the electric vehicle charging proposal is confined to light vehicles. The technology in this area is accelerating at a much greater rate for light vehicles than for heavy vehicles, partly due to the need to establish a broad network of private and public charging facilities. In the USA, a recent survey found that 92 percent of survey respondents said their facility is not “very well equipped” to accommodate commercial charging needs. We believe that this percentage would also be high in Australia. In contrast, most light vehicles can simply be charged overnight at home.

The current fuel tax regime needs a substantial overhaul.  There are several factors which point to the need to re-frame this tax regime as soon as possible. Continued improvements in the fuel efficiency of the passenger motor vehicle fleet in Australia are likely to contribute to a further slowing of the growth in total fuel consumption, in turn constraining growth in fuel excise in general and therefore placing more of the incidence of the tax on heavy vehicles. The uptake of electric vehicles will further accelerate the rising fuel efficiency of the passenger motor vehicle fleet in Australia. Electric vehicles are currently a small proportion of the market and are therefore having little effect on fuel excise receipts at the present time. But electric vehicles are projected to represent around 19 percent of the light vehicle fleet in Australia by 2036–37. The impact on fuel consumption of an increasing uptake of electric vehicles will further erode the fuel excise base, underlining that this is not a sustainable tax.

The need to move to an altogether new form of road charging is clear. Singling out electric vehicles ignores the role that different fuel inputs may play in the future vehicle mix and carries old thinking based on one fuel, one vehicle into an uncertain future.