The nation’s peak motoring body says both major parties must confront the replacement of fuel excise with a road-user charge and start the transition by applying it to the growing fleet of electric cars.

In a paper to be released on Thursday, the Australian Automobile Association says Labor and the government can no longer keep the issue in the political too-hard basket.

With an increasing number of electric vehicles being built and sold, AAA chief executive Michael Bradley suggests a transition by applying a road-user charge to these cars which would be roughly equivalent to the fuel excise their owners do not pay.

“Ultra-low fuel consumption vehicles currently enjoy an effective road use subsidy equivalent to the fuel excise rate,” Mr Bradley said.

To encourage the uptake of such vehicles, the AAA recommends the removal of 5 per cent tariffs which apply to such cars imported from countries with which Australia does not have a free-trade agreement, and the removal of the luxury car tax which applies to the bulk of electric vehicles.

Idea shelved after PM change

Independent South Australian senator Tim Storer, who chaired a Senate inquiry into electric vehicles, recommended phasing in a use charge for electric cars from 2025.

He had the Parliamentary Budget Office cost a range of options to increase the purchase of such vehicles. The modification of the luxury car tax to narrow the definition of fuel-efficient vehicles would cost the budget $1.54 billion over the four-year budget period

The Turnbull government had promised an inquiry into a road-user charge to be led by “an eminent Australian”. It never delivered and when Scott Morrison became Prime Minister, the idea was shelved.

Mr Bradley said it could no longer be ignored and whoever won the election needed to grasp the nettle.

“The federal government will this year collect $12.6 billion in fuel excise from motorists. The inequity of this tax is well understood: drivers of different cars pay different prices to use the same road, with the economically underprivileged usually being hit hardest,” he said.

“However, car industry observers are pointing to an even bigger problem for the government to solve. Volvo last year announced that 50 per cent of sales will be fully electric by 2025. Volkswagen has said it will sell 1 million electric vehicles by 2025.

“While predictions regarding the timing of mass take-up of the internal combustion engine’s replacement vary considerably, the consensus regarding this technology’s impending arrival is as clear as the need for a structural adjustment to the way we all pay for road access.”

Tough sell to voters

He noted that the Productivity Commission, the Harper Review, the Henry Tax Review, and Infrastructure Australia have all recommended a shift away from fuel excise to a road-user charging model.

To help smooth the politics of transition, he reiterated the excise component of petrol, currently 41.2¢ per litre, should be itemised on receipts when motorists fill up.

“In a country where too few people are aware they even pay the invisible excise, the task of selling what will inevitably be seen as a ‘new’ tax on mobility, has proven too hard,” he said.

And to build support for change, 50 per cent of excise and road-user charge revenue should be hypothecated to a dedicated fund for roads.

The AAA will also call for a review of the national land transport network, the policies that support its operation, and how it is funded in the long term – to deliver a Land Transport White Paper by the end of 2020.

Extracted from AFR