Road user charges for electric vehicles are being considered by the Victorian and NSW governments, paving the way for a major overhaul of the way motorists are taxed as early as next year.
Victoria is likely to be the first mover, with senior government and industry sources confirming consultations had begun on a charge that is under consideration for May’s Victorian state budget. NSW will watch developments closely before deciding on its own course of action, but Treasury has been discussing changes with the sector.
The sources, who declined to be named because the consultations were confidential, said there had been “a lot of conversations” and the tax “was on the radar” as both Victoria and NSW look for reforms to stimulate the economy.
Treasurer Josh Frydenberg has urged the states to find new policies across the transport and infrastructure sectors to lift a “handbrake” on productivity.
The shift towards road-user charging, which charges motorists for each kilometre they drive, is likely to be the first step in a transformation long advocated by Infrastructure Australia to encourage all motorists to catch public transport and to avoid clogging city streets, by driving only when necessary.
The federal government is grappling with a projected sharp shortfall in the $11.3 billion fuel excise budget as the Bureau of Infrastructure, Transport and Regional Economics forecasts 60 per cent of all new cars sold to be electric-powered by 2046. Tax revenue from fuel excise has already fallen 30 per cent since 2001.
The charges would apply only to electric vehicles initially, because they do not pay a fuel excise tax, worth 4¢ per kilometre at the bowser, like petrol and diesel powered cars. Fuel excise is in theory designed to pay for road maintenance and infrastructure but in reality is diverted to federal budget’s consolidated revenue fund.
A state-based tax would allow the states to quarantine their own revenue for funding new infrastructure as the populations of Sydney and Melbourne are forecast to grow beyond 8 million each by 2050 according to the Australian Bureau of Statistics.
On Thursday Infrastructure Partnerships Australia will release research showing that even with a road user charge applied, electric vehicles will still be cheaper to own and run than an internal combustion engine vehicle.
The research finds that over the lifetime of an electric vehicle, with an equivalent road user charge of 4¢ per kilometre, electric vehicle owners will save at least $3600 over an eight-year span in operating costs compared to fuel-using motorists.
Infrastructure Partnerships Australia chief executive Adrian Dwyer said the introduction of road user charges for electric vehicles would be a “home-run reform”.
“Fuel excise is in terminal decline, while the total number of vehicle kilometres travelled is only growing. This trend started many years ago as vehicles became more fuel-efficient and is set to fall off a cliff as a wave of electrification hits,” he said.
“Once there is an electric car in every street, the opportunity will be lost.”
Mr Dwyer said because federal fuel excise was diverted into consolidated revenue, eventually a falling tax take would see money drawn from hospitals and schools because there would be less money to pay for roads.
“If you were for looking for a unicorn reform for the states to do, this would be a good one,” he said.
Extracted from The Sydney Morning Herald