Referral of the inquiry
The COAG Reform Fund Amendment (No Electric Vehicle Taxes) Bill 2020 (the bill) was introduced into the Senate on 10 December 2020 by Senator Janet Rice (Australian Greens) as a private Senator's bill and read a second time on the same date.
On 4 February 2021, the Senate referred the bill to the Senate Economics Legislation Committee (the committee) for inquiry and report by 30 April 2021 which was subsequently extended to Friday, 7 May 2021.
Purpose of the bill
The Explanatory Memorandum (EM) describes the object of the bill is to:
…neutralise the revenue effect of States and Territories that legislate discriminatory taxes or charges against the purchase and use of electric vehicles. The Bill will also financially reward States and Territories that don’t place such barriers to electric vehicle uptake by redistributing the money withheld from non-complying states.
The overriding purpose of this bill, as described above, is to prevent the states erecting road blocks to the uptake of electric vehicles (EVs). Transport emissions are around 20 per cent of Australia's greenhouse pollution and EV technologies are, according to the EM, going to be essential for Australia to fulfil its commitments under the Paris Agreement.
According to the EM, the bill seeks to neutralise the revenue effect of states and territories that legislate taxes or charges against the purchase and use of EVs. The bill will also financially reward states and territories that do not place such road blocks to electric vehicle uptake by redistributing the money withheld from non-complying states and territories.
This bill will insert a statutory condition on grants of financial assistance to the states and territories from the COAG Reform Fund, that will provide that a jurisdiction with a charge against EVs will either have their grants reduced in the following financial year by the amount raised from such taxes and charges in a given financial year or will be required to pay back to the Commonwealth an amount of the grant equal to the amount raised from such taxes and charges.
On Thursday, 10 December 2020, Senator Rice, in her second reading speech explained further the intent of the bill:
Transport emissions policy matters, because transport is an important sector contributing to our emissions—it makes up around a fifth of emissions in Victoria and New South Wales, and is even higher—a third of emissions—in South Australia. That makes it even more important that we have policies to reduce transport emissions, at every level. Sadly, the complete policy vacuum at a Commonwealth level has contributed to disastrous policy at a state level.
In South Australia, we've seen the Liberal party there make their state the first jurisdiction on the planet that wants to make it more expensive for people to operate electric vehicles.
In Victoria, the government wants to apply a charge to electric vehicles that wouldn't apply to other vehicles, unfairly penalising them and making them more expensive to operate.
In New South Wales, they are actively considering the same terrible ideas as South Australia and Victoria that will make it more expensive for people to operate an electric vehicle.
The reason this is all so unacceptable is that we know that electric vehicles are already more expensive than they should be, and that governments should be doing more to incentivise their uptake. Economic analysis shows that every driver who switches to electric vehicles provides a $1,370 boost to government revenue, and an $8,763 boost to the Australian economy. Keep in mind that's even without a price on carbon, based on current settings. Converting just a quarter of Australia's fleet to electric vehicles would deliver a $4.4 billion economic benefit—again, in a context without a carbon price.
So let's be clear. This isn't a perfect bill. What we should have is a national electric vehicle strategy that incentivises uptake, not a Commonwealth vacuum and ad-hoc state taxes. At the last election, the Greens had a clear policy that outlined steps the government could still take:
Fast track the roll-out of charging infrastructure;
Legislate tougher vehicle pollution standards;
Setting clear electric vehicle targets, to provide incentives for manufacturers; and,
Significantly reducing the cost of electric vehicles, not increasing them.
In the interim, this bill provides a clear route for the Commonwealth to undo the state taxes on electric vehicles, ensuring that state governments don't impose them unfairly, at exactly the wrong time, when we need to be encouraging uptake of electric vehicles. Any state government that would impose an unfair tax on electric vehicles would lose a comparable amount of revenue, which would be distributed to other states on a per capita basis. This is a basic step, to ensure we're not putting road blocks in front of electric vehicles.
During the second half of 2020, a number of state jurisdictions either made announcements or indicated they were actively considering introducing a tax on EVs. As these vehicles consume no petrol and thus pay no fuel excise, the tax is intended to make them contribute to the cost of maintaining the road network in the same way that drivers of petrol and diesel vehicles do.
In November 2020, it was announced in the South Australian Government's budget proposal that owners of electric vehicles would pay a fixed annual levy on top of their registration as well as a distance-travelled charge.
The government is intending to introduce a road user charge for plug-in electric and zero emission vehicles. The charge will include a fixed component (similar to current registration charging) and a variable charge based on distance travelled.
The Victorian Government is also seeking to introduce a tax on electric vehicle drivers of 2.5 cents per kilometre for full electric vehicles, while plug-in hybrid vehicles would face a usage tax of 2.0 cents per kilometre travelled. The tax is reportedly similar to the South Australian version.
The New South Wales (NSW) Government is reported to be also considering the idea:
[NSW Treasurer] Mr Perrottet has indicated he wants to take a plan over an electric vehicle tax to cabinet in coming months. He said he was grappling to find a sensible policy solution that would generate revenue for road maintenance in the future without impeding the growth of the industry.
In contrast, the Australian Capital Territory (ACT) Government is offering zero-interest loans to help subsidise new and used electric vehicle purchases.
Human Rights Implications:
The EM argued that the bill does not engage any of the applicable rights or freedoms and concludes that the bill is compatible with human rights as it does not raise any human rights issues.
The EM provided no assessment of the bill’s financial impact.
Regulation Impact Statement
The EM provided no regulation impact statement.
Conduct of the inquiry
The committee advertised the inquiry on its website and wrote to relevant stakeholders and interested parties inviting written submissions by 4 March 2021.
The committee accepted and published 22 submissions, which are listed in Appendix 1.
The committee held one public hearing in Melbourne on 22 April 2021. The names of witnesses who appeared at the hearings can be found in Appendix 2.
The committee thanks all individuals and organisations who assisted with the inquiry, especially those who made written submissions and participated in the public hearing.
Notes on references
In this report, references to the Committee Hansard are to the Proof Hansard and page numbers may vary between Proof and Official Hansard transcripts.