The committee accepted and published 22 submissions to the inquiry.
This chapter will examine the themes expressed in those submissions and concludes with the committee’s reflections and recommendations.
The chapter will begin by reviewing the Victorian Government's arguments for the introduction of its tax.
The Victorian Governments position
The Victorian Government, in its submission to the inquiry, argued that whatever revenue it was receiving from its new tax, it has more than put back into transitioning Victoria's car fleet to Electric Vehicles (EVs):
The states and territories that are introducing, or considering introducing, distance-based charges for [Zero and Low Emissions Vehicles] ZLEVs are investing in support programs for ZLEVs at a cost far in excess of the revenue that will be generated from these charges over the short-term.
The Andrews Government’s current funding commitments to support the uptake of ZLEVs are already 50 per cent above the expected revenue received from distance-based charges over the first three years of the scheme.
The Victorian Government went on to argue that the bill as it stands will penalise those states and territories seeking to raise the revenue to address barriers to the uptake of EVs, including addressing concerns about those vehicles' range.
Moreover, the Victorian Government did not believe it premature to introduce such a tax at this time, believing it necessary for the long term sustainability of road construction and maintenance funding:
Governments need to be forward-thinking to address structural changes in road-related revenue bases and the resulting long-term financial sustainability challenges for state and territory road networks.
The Andrews Government's modest distance-based charge for ZLEVs registered in Victoria, to commence on 1 July 2021, will ensure motorists contribute their fair share to the cost of funding Victorian roads and road-related infrastructure.
It will improve the financial sustainability of Victoria’s road network and ensure we can continue to invest in our transport networks into the future.
Revenue implications of EV uptake
Despite arguments from proponents of the taxes on EVs that they are necessary to combat revenue loss, evidence provided by the Electric Vehicle Council indicated that EV uptake provides a net revenue benefit to government:
Recent analysis from EY commissioned by the Electric Vehicle Council has quantified the net benefit of electric vehicles in Australia, where the average net benefit to government and society of an electric vehicle replacing an internal combustion engine vehicle is $8,763.4 This includes higher tax revenue from electric vehicle sales today, due to their comparatively higher upfront cost.
The modelling provided to the Committee estimated specifically that "the costs and benefits of an ICEV being displaced by an EV … is an increase in net revenue of $0.011/km" in direct government impacts, even before considering the benefits associated with reduced emissions, health impacts, reduced noise pollution, and other factors.
Support for the bill's intent
There was a high degree of support from the submissions received for the bill’s ultimate intent––the encouragement of the uptake of EVs in Australia. Submitters argued against the imposition of a new tax specifically aimed at EVs as it would be a disincentive for people who wished to buy the vehicles.
For example, Hyzon supported the bill as it stands as a means to oppose any state-based actions to introduce discriminatory taxes and charges on electric vehicles, as did Evie Networks.
There was also in-principle support from Federal Chamber of Automotive Industries (FCAI) to the introduction of taxes which could hinder the uptake of EVs:
The FCAI supports the goal of the bill to prevent the States erecting roadblocks to the uptake of Zero and Low Emissions Vehicles (ZLEVs).
This sentiment was also expressed by RAC Western Australia:
RAC broadly supports the COAG Reform Fund Amendment (No Electric Vehicle Taxes) Bill 2020's general intention of deterring state governments from introducing state-based road user charges which could act as a road block to the uptake of EVs.
Dr Jake Whitehead was also critical of state governments seeking to introduce such taxes:
Several State Governments have recently announced plans to introduce electric vehicle (EV) taxes from mid-2021. While details on the final designs of the schemes may change, initial reports suggest a 2.5 cent per kilometre charge will be introduced in some jurisdictions, strictly applied only to EV owners. In some cases there may also be a fixed cost component in addition to the per-kilometre fee.
Unfortunately, these State Governments have not recognised that higher taxes will lead to lower EV sales, as is the case when any additional tax is applied to a product or service. Additionally, these jurisdictions have not released detailed modelling to quantify the impact of their proposed EV taxes on market adoption, emissions and other economic effects.
The Electric Vehicle Council also argued against the introduction of taxes which would inhibit uptake of EVs:
Various state governments' intention to introduce a new tax on electric vehicles is premature and will stifle Australia's transition to zero emissions vehicles. The lack of policy support for electric vehicles has already caused Australians to miss out on many electric vehicle models and for Australia to be a global laggard in electric vehicle uptake.
Reservations about the bill's methods
Despite the in-principle support, a number of submitters argued that the bill in its current form was not the best way to pursue support for the uptake of EVs.
Infrastructure Partnerships Australia argued that the rights of states to levy their own taxes and charges would effectively be overridden by this bill:
The principal concern is that the bill as drafted would effectively nullify the constitutional right of a state to raise a revenue against the use of its assets by removing that from the GST distribution that would be allocated to the state at a commensurate amount. That's a pretty strong overreach of the central government's power and would actually have very little material impact on getting reform done. It seems to me that if we think at a national level we want to encourage reform and if the constitutional right to levy the charge lies with the state then we should be encouraging the states to do that reform, not penalising them when they do.
RAC Western Australia argued for a holistic approach to the question of road use and revenue:
A state-based, piecemeal approach will not provide a solution to the projected decline in fuel excise revenue and risks further complicating the progression of national reform of road user charging in Australia…
To respond to issues associated with declining fuel excise revenue and the need for a more equitable, efficient and effective funding model, RAC supports consultation on, and development of, a new road user charging model encompassing all vehicles and considering the holistic impacts of road use to replace the array of existing fees and charges used to generate revenue. This should occur only as part of a genuine national reform of taxation on road users and be informed by a rigorous cost-benefit analysis of all social, economic and environmental impacts.
The FCAI, in their submission, also supported a consistent and national approach to the question of excise and road user charges:
The FCAI recognises that the decline in fuel excise, the taxation of motorists and their vehicles, is a long-term issue that needs to be addressed. We also understand that road user charging should play a role in Australia’s future tax regime. However, such a transition needs to be undertaken in a holistic and nationwide manner, recognising the importance of [Zero and Low Emissions Vehicles] ZLEV's. The FCAI encourages the Commonwealth and State and Territory governments to develop a RUC that is nationally consistent, broad based, technology neutral and replaces inefficient Commonwealth and State taxes – not take the easy path of punishing ZLEVs.
During the public hearing, the FCAI continued on the same theme:
I think it's really important that there is a nationally consistent approach adopted by all the states. The last thing we would want is another railway gauge issue in this country.
The Australian Automobile Association (AAA) expressed similar views:
AAA suggests the committee should not be making policy decisions of this magnitude until the Parliament has had a comprehensive debate about, and has a clear understanding of, land transport funding reform including:
a pathway for structural reform of the nation's transport taxation and funding arrangements
the medium- and long-term implications of the declining revenue base from fuel excise
how to introduce a fair and equitable distance-based road user charging system that does not disincentivise the uptake of [ultra-low fuel consumption vehicles] ULFCVs, and
how revenue and expenditure from the introduction of state-based road user charges on ULFCVs will be treated as part of existing arrangements.
A piecemeal approach such as that proposed in the bill will exacerbate rather than address the underlying issues that flow from an unfair, inequitable and flawed land transport funding model.
Finally, the Australian Logistics Council expressed their disappointment with the current and proposed mix of legislation and how it impacts negatively on business:
…so much of the regulatory framework that impacts on businesses is designed and enforced at a State or local level. For those operating businesses in the freight logistics sector, this means daily confrontation with a hodgepodge of legislative and regulatory hurdles that variously confound and complicate the process of transporting freight safely and efficiently.
ALC is disappointed that Australia is at the precipice of such disorder.
Victoria has announced the introduction of a 2.5 cent per kilometre levy on electric vehicles, following an earlier decision made by South Australia.
The ACT appears to be mooting an 'opt in' distance charge whilst the NSW Government appears uncertain.
It is disappointing that a simple and nationally consistent Federal fuel excise regime is at risk of ultimately being replaced with another complex set of charges administered at the state and territory level.
The committee notes the consistent support for EVs through most of the submissions received. With currently only a 1 per cent take-up rate, there is a general consensus in those submissions that more could be done to encourage Australian consumers to purchase EVs. The idea of imposing a tax specifically on EVs has met with significant opposition.
The committee acknowledges that there is a certain logic to the proposals being put forward by the Victorian and South Australian Governments. That is, if EV drivers are not contributing to road construction and maintenance through the excise currently levied on petroleum products, then a new tax specific to EVs could make up the shortfall.
The committee shares the concerns of many submissions that what is being proposed in this bill is unlikely to produce an optimum result. Allowing the creation of a further set of inconsistent rules is unlikely to benefit anyone and, as it stands, this bill does not facilitate a consistent national approach regarding EV taxes and charges. The committee is of the view that this could be an item for consideration by the National Federation Reform Council.
Despite some support demonstrated for the bill's intentions, the committee shares the view of those submitters who argued that the bill as it is currently structured is not ideal and may cause more problems than it solves. Accordingly, the committee is of the view that the bill should not be passed.
The committee recommends that the bill not be passed.
Senator Slade Brockman
Liberal Senator for Western Australia