NSW could become the first jurisdiction in the world to tax electric cars based on distance travelled – and automatically track vehicle odometers – in an attempt to make sure they pay their fair share.

The radical proposal to tax electric vehicles (EVs) per kilometre travelled would also eventually include petrol and diesel cars – and potentially bring an end to annual registration fees.

Drivers of electric cars currently avoid paying fuel excise, which is 42.3 cents per litre of petrol and diesel sold – a large portion of which goes into funding roads – because they charge off the electricity grid.

Detractors of electric cars say EVs are currently getting a free ride from the 98 per cent of motorists in petrol and diesel vehicles, who pay fuel excise every time they fill up at the bowser.

Supporters of electric cars say governments need to increase subsidies – not impose further taxes – on EVs until they reach critical mass. So far this year, electric and hybrid cars have accounted for just 2 per cent of new vehicles sold. 

Governments around the world are trying to find a way bring electric cars into line with taxes paid by drivers of conventional petrol and diesel vehicles.

A draft report by the NSW Government says it is considering a “nationally compatible and fair road user charging scheme for electric vehicles” that would eventually apply to all motor vehicles.

The NSW Government says the technology required to implement a distance-based charge for electric vehicles already exists. 

“Odometer readings reported annually or biannually can be used to calculate the charge. These readings can be automatically submitted by vehicles, where possible, or self-reported (with photographic evidence),” the report said, adding their would need to be some form of auditing to avoid odometer tampering. 

The report said it does not want to tax electric cars unfairly, rather it wants to bring them into line with taxes that already apply to conventional cars.

“Governments may want to recognise the higher upfront cost and associated environmental benefits of electrical vehicles,” the report said, “to ensure the charge is less or at least no higher than the fuel excise for regular petrol or diesel vehicles.”

However, Behyad Jafari, the CEO of the Electric Vehicle Council of Australia, says it is too soon to start applying a separate tax on electric cars because they are still an emerging technology.

“The timing is all wrong,” said Mr Jafari. “Right now is the time to be supporting electric vehicles, not hitting them with a new tax.”

Mr Jafari conceded there would eventually need to be “a conversation” about electric cars paying road tax in line with – or equivalent to – petrol and diesel vehicles, however that was years away, he said.

“Most other countries have been supporting electric cars with incentives … and now Australia wants to be the first country in the world to create a special tax for them,” said Mr Jafari.

Meanwhile, the draft report by NSW Treasury also aimed to address privacy concerns, indicating the technology which automatically uploads a vehicle’s odometer details (the total distance travelled) should not be able to pinpoint location.

“The review recognises that the proper management of privacy-related concerns is an important issue requiring expert input and broad consultation,” the report said. 

“It will be important to strike the correct balance between privacy, functionality and citizen choice. There may be some insights to be gained from electronic tags (e-tags) that record use of toll-roads and Opal cards, which if registered, record trips on public transport, which have both been in place for some time without any major privacy problems.”

The NSW Government report said for the system to be successful, other states would ideally co-operate.

“Distance-based charging is a reform that can be implemented by state governments unilaterally, collaboratively or in conjunction with the Commonwealth,” the report said.

“Freedom of movement between states, however, means that different charging approaches could create opportunities for arbitrage in terms of where people choose to use and register their vehicles. Therefore, there are clear benefits for state governments to collaborate to ensure consistency and compatibility across state lines, while allowing some flexibility to adapt the charging scheme to reflect local circumstances.”

Unlike fuel excise, which is collected by the Federal Government as general revenue and then partially redistributed to the states through infrastructure grants and financial assistance to local governments, “a distance-based (tax) should be collected and retained by states.”

Australian governments have for the past four years been grappling with how to more fairly tax electric cars. 

In 2016, the Federal Government announced an inquiry into road funding reform but the inquiry is yet to commence. 

“There is an opportunity now to test and trial a distance-based charge on electric vehicles to at least partially correct the inequity in the road funding model with respect to fuel excise,” the draft report by NSW Treasury said. 

“Given their current relatively small share of the market and concentration among relatively higher-income drivers, electric vehicles provide possibly the easiest way to correct different problems,” the report continued.

“They (electric cars) are among the newest in the market, providing governments with the technological platform to explore and implement the best mechanism to manage privacy concerns.”

Aligning road funding reform to the rise of electric vehicles “makes sense now”, the report concluded.

“A road user fee framework for electric vehicles as a first step, on a smaller scale, will prepare the way for a longer-term transition to a state-based road-user charging scheme where all vehicles pay for road use based on the costs they impose.”

Extracted from Drive.com.au