'It's madness': New South Wales and SA want to start taxing electric vehicles, in what is being called a world first

Electric vehicles (EVs) could soon be taxed in Australia. (Michael Dodge, Getty Images)
  • New South Wales has indicated it could follow South Australia in introducing new taxes on electric vehicles (EVs).
  • If they do so, they could become some of the first jurisdictions in the world to impose such a tax, according to Australia’s Electric Vehicles Council (ECV).
  • With EVs just making up 0.6% of the market, the industry argues the extra cost would be “pure poison” for EVs in Australia and could slow down eventual uptake as well as scuttling future tax revenues.
  • Visit Business Insider Australia’s homepage for more stories.

Electric vehicles (EVs) could be about to get a lot more expensive for the average Australia, as
the country’s biggest state considers taxing them.

New South Wales Treasurer Dominic Perrottet said he was in discussions with other states on designing a user charge on the vehicles, after South Australia proposed a similar taxation scheme.

A report commissioned by Perrottet last year argued in favour of a tax on the basis that “electric vehicle drivers use the same road at very little cost.”

With EVs making up just 0.6% of the total market share in Australia however, the move to tax it this early has been condemned by the industry.

“One day, when electric vehicles start becoming commonplace, the time may come to consider new taxes. But at this point in our history, when we should be doing everything possible to encourage people to switch to electric vehicles, this tax would be pure poison,” Electric Vehicle Council (EVC) chief executive Behyad Jafari said.

According to Jafari, the move would make the two states the first jurisdictions in the world to tax EVs in this way.

Indeed, the lack of EVs would appear to undermine the benefit of such a tax anyway. As South Australia’s budget papers indicate, “collections from the proposed user charge are expected to be very low across the forward estimates while there are still very few electric and zero emissions vehicles in South Australia”.

The rationale to do it, he says, doesn’t add up.

“Yes, in the long run governments won’t be receiving as much in fuel excise as people drive more efficient vehicles. But that’s a good thing. Burning less foreign oil in our cars is good for our city air, it’s good for our health, it’s good for our climate, and it’s good for our economic sovereignty,” Jafari said.

In a similar vein, progressive think tank The Australia Institute, criticised South Australia’s move on Wednesday with director Noah Schultz-Byard saying it was “in essence, a great big new tax on not polluting”.

Jafari disputed the premise that excises are directed straight into roads, slamming it as “a myth”.

“If tax is dwindling from one area, governments don’t have to make it up from that same area. That would be like whacking a new tax on nicotine gum because you’re worried about a drop in the tobacco excise. It’s madness,” he said.

EY modelling, commissioned by the EVC and released last month, shows that the uptake of EVs was actually a net positive to economies, even considering the loss in fuel excise.

Specifically, EY said that for every EV that replaces a combustion engine there was a net economic benefit of $8,763 and more than $40,000 for every bus.

The figures were collated by considering the collective impact direct changes to government revenue, via various taxes, as well as broader external factors including carbon emissions, pollution and noise.

With that in mind, Jafari said it didn’t make sense that a NSW Liberal government would seek to create disincentives in the EV market before it even got up and running.

“As any Liberal worth their salt will tell you, when you whack a big new tax on something you discourage its use. That’s exactly what would happen here to the determent of every citizen in New South Wales – and to the detriment of the planet,” he said.

“New South Wales is already a global dirty car magnet because other nations have restrictions on emissions. Mr Perrottet’s plan would well and truly cement that status.”

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.