The Victorian government’s plan to tax drivers of electric vehicles is in jeopardy because the government does not have the support to pass the legislation in Parliament’s upper house.
Key independent MPsintend to block the new tax that Treasury expects to raise $30 million over four years and is forecast to cost the average EV motorist between $260 and $300 a year after its proposed July start date.
Sales of electric vehicles are on the rise around the world.Credit:Bloomberg
The state government wants to tax EV drivers, who do not pay fuel excise, 2.5 cents per kilometre and make them contribute to the cost of maintaining the road network. The tax is similar to one soon to be operating in South Australia and is designed to ensure the state does not suffer a revenue shortfall when EVs – which make up less than 1 per cent of Australian vehicles, 10 times fewer than Europe – become a larger share of the market.
The Andrews government has set a net-zero emissions target for 2050 and has taken progressive stances on environmental and social issues, but the Greens hope to use the EV policy to win over Labor voters in inner-city electorates. New polling shows voters in key seats have a negative attitude toward the tax and would be more likely to support Labor if it incentivised the purchase of EVs.
Reason Party MP Fiona Patten was the only member of the 12-person upper house crossbench who said she would be supporting the tax when it is debated in Parliament some time in the first half of the year.
The Sunday Age surveyed the crossbench and six – including two Liberal Democrats, Transport Matters’ Rod Barton and Sustainable Australia’s Clifford Hayes – said they were unlikely to support the legislation. The Greens’ Samantha Ratnam and Animal Justice Party’s Andy Meddick, who have tended to back Premier Daniel Andrews’ progressive agenda, are also set to block the bill. The state opposition confirmed it was very unlikely to support the tax and has begun campaigning against it.
Two Justice Party MPs and Shooter and Fishers MP Jeff Bourman have not yet considered the law and independent Catherine Cumming did not respond to questions.
Labor holds 17 of the 40 upper house votes and the opposition holds 11. The government is likely to need five crossbench votes to pass the legislation.
Treasurer Tim Pallas said it was a “modest” tax that would equate to about half the rate of tax indirectly paid by internal combustion vehicle drivers through fuel excise.
“This is about equity and fairness to ensure that every road user pays for their use of the road,” he told The Sunday Age.
Victorian Treasurer Tim Pallas says the planned tax on electric vehicles is “modest”.Credit:Penny Stephens
The Treasurer, who is confident of securing support for the tax, said the government was working with car manufacturers to determine how to send a message to the community that the government supports EVs. He emphasised a government pledge to spend $45 million on charging stations and said EVs would begin to dominate the market some time after they lowered in cost over the next decade.
Polling conducted by consultancy Redbridge, commissioned by industry association the Electric Vehicle Council, shows more than 70 per cent of Labor and Greens voters in the seats of Richmond and Albert Park would be more likely to support the Andrews government if it helped make EVs cheaper through incentives and subsidies.
The phone survey of about 2100 people showed about 40 per cent of voters in the two seats believed the tax was motivated by a desire to raise revenue rather than balancing the burden of funding road maintenance between all drivers. More than 20 per cent said the government was acting to enshrine profits for petrol companies.
However, a survey of 4500 people conducted by the Australian Automobile Association, which represents motoring groups like the RACV, found 80 per cent believed EV drivers should be contributing to the cost of road maintenance.
Sam Hibbins, the Greens member for Prahran, said his party had already started campaigning against the tax and aimed to win inner-city seats including Richmond, which Labor holds by a slim margin.
“Transport is the largest source of growing emissions in Victoria and taxing EVs is completely out of step with what we need to be doing,” he said.
Mathew McCrum bought one of the first batch of Teslas in Australia.Credit:Simon Schluter
Mathew McCrum, a funds manager from Richmond who bought one of the first batch of Teslas in Australia, said he would ordinarily be more likely to vote for Labor but is set to vote for the Greens over the proposed tax.
“This is like taxing non-smokers … It’s so short-sighted,” he said.
Mr Hibbins said the tax was designed to boost the value of VicRoads’ licencing and registration arm, which the Andrews government has signalled it may partly privatise. By potentially using the division as the body to collect the tax revenue, the government could attract a higher price when it sells the asset, he argued.
Infrastructure Partnerships Australia, the industry group representing major infrastructure firms, has pushed for the tax in recent years and argues it will not stymie uptake of EVs.
Electric Vehicle Council chief executive Behyad Jafari said voters would contrast the state tax with the Biden administration’s decision to swap the government’s 645,000-strong vehicle fleet to EVs and the UK’s ban on the sale of petrol engine vehicles by 2030.
“Victorian voters don’t want a tax on electric vehicles, they want their politicians to be driving policies that will allow them to be able to go to a dealership and pick up the keys to an electric vehicle,” he said.
Victoria offers stamp duty exemptions for some EVs and a $100 discount on registration and the ACT and Queensland have similar policies. The NSW government has signalled it may pursue an EV tax and the Board of Treasurers, a forum of all state and territory treasurers, has been considering models to tax EV users. There are no federal incentives or subsidies to make EVs cheaper and the lowest-priced EV on the market is the Hyundai Ioniq Electric Elite at $48,970, meaning the comparatively high cost of the vehicles is hindering mass uptake.
Industry sources, who were not authorised to speak publicly, said major automakers including Tesla were not opposed to the levy on EV drivers if the reform was part of a broader set of changes that included greater incentives to purchase the vehicles.
Nissan Australia managing director Stephen Lester said EV take-up would not increase if taxes are added to the cost of ownership and called for the Victorian government to consult with the industry.
More than half of the vehicles in Norway, which heavily subsidises EVs, are electric and the average EV penetration rate in Europe is 10 per cent. More than 6 per cent of vehicles in China are electric compared with about 8 per cent in California, where people receive about $20,000 in combined federal and state subsidies. Japan, Canada and the US all offer incentives worth more than $5000.
Research by Dr Jake Whitehead of the University of Queensland, a specialist in road user taxes who works with the International Electric Vehicle Policy Council at the University of California, shows the Victorian tax could inhibit the state from reaching its climate targets.
The government was scheduled to announce its 2025 and 2030 targets in March last year but this was delayed due to the pandemic. A government-appointed panel found last year that Victoria should reduce its emissions by 29 to 32 per cent in the next five years, and 45 to 60 per cent over the next decade. Adopting these targets could pose a political risk because setting benchmarks at the higher end of the recommended scale may force the closure of the Yallourn coal-fired power station.
Dr Whitehead said transport was the third-largest contributor to emissions and the only sector that was continuing to grow its emissions. He said other parts of the sector, including planes and large ships, would not be able to easily transition to alternative energy sources, meaning vehicles needed to be the focus.
“Victoria has completely ignored the major benefits EVs and seems to be blind on the effect of this proposal,” he said, adding that even a modest tax can have a pyschological effect on potential buyers.
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