Apart from trying to nickel-and-dime superannuation to find a $1 billion here or there, Labor should focus on the gaping revenue hole that threatens to appear over the next decade.
One of the tougher decisions Jim Chalmers made upon becoming treasurer was to not extend the 22¢-per-litre reduction in fuel excise.
The six-month reduction, which came at a net cost of $3 billion, was a cost-of-living relief measure that the former government, with Labor’s support, included in its final budget, which was handed down just before the election campaign.
Chalmers, who in opposition was never shy to press the Coalition to spend more, especially on extended COVID-19 relief, changed his tune upon moving into the big seat. Confronted with the reality of rampant spending blowouts in such big-ticket items as NDIS and defence, he reasoned correctly and responsibly that an extension of the excise reduction was unaffordable.
Killing it off as scheduled on September 28 required a modicum of courage, given fuel prices had barely abated, inflation was still rising and the cost of living was – and is – a paramount concern of voters.
And that’s why, for the same reasons, Chalmers and his team must turn their minds to the national imposition of a road user charge for electric vehicles. And they must do it before either the states go their own separate ways, or there are so many people driving electric cars that it becomes politically impossible to introduce what would be inevitably regarded as a new tax.
Here’s the economic equation. Fuel excise this year is forecast to deliver a net return to the budget of $13.7 billion. By the time the vast majority of the nation’s vehicle fleet is electric, that revenue will have disappeared.
Fuel tax is collected by the Commonwealth and distributed to the states, ostensibly to spend on roads. We will still need roads when all cars are electric.
Frustrated by the spinelessness in Canberra, some states started freelancing by flagging or introducing their own charges.
EVs weigh much more than internal combustion engine (ICE) vehicles, and thus cause far greater damage to the roads. Yet, they contribute nothing to road maintenance.
At the same time, governments are falling over themselves to encourage the uptake of EVs with tax breaks, all for environmental reasons. The fringe benefits tax exemption for EVs granted by the Albanese government, on top of there being no fuel or service costs, has made them an increasingly attractive lease option.
Even more so in places like the ACT, where already one in 10 new cars being sold is electric, and they are driven excise-free on badly potholed roads, thanks to free registration designed to encourage uptake.
From July 1 next year, the ACT will move permanently from a weight-based registration system to an emissions based-system. Registering an EV will cost approximately half as much as an ICE vehicle. The Labor-Greens government, which excels at both taxing and mandating behaviour, contends 96 per cent of vehicle owners will pay the same or less for their rego; 4 per cent – mainly the less-well-off driving old clunkers – will pay more.
Road user charge isn’t a new idea
The need for a national road user charge has been around for years. The Productivity Commission recommended it in its landmark 2017 Shifting the Dial report, commissioned by then-treasurer Scott Morrison to highlight the great productivity challenges facing the nation.
The next five-yearly report, which Chalmers will release soon, will most likely say the same thing.
The former government made a big noise about acting but did nothing because of politics. In 2016, then-urban infrastructure minister Paul Fletcher promised an inquiry into replacing fuel excise and registration fees with a system in which motorists would be charged for every kilometre they drive.
But Malcolm Turnbull killed the process dead when Barnaby Joyce and the other Nationals kicked up a stink, claiming it would be unfair to rural folk to introduce a fee structure based on distance driven.
Which, of course, is as dumb as a box of rocks given fuel excise does the same thing, in that the further you drive, the more petrol you use and the more excise you pay.
Frustrated by the spinelessness in Canberra, some states started freelancing by flagging or introducing their own charges.
New heights in idiocy
This week, however, the South Australian Labor government reached new heights in idiocy by repealing a 2.5¢-per-kilometre charge introduced by the former Liberal government. It was due to begin either in July 2027 or when electric vehicles reached 30 per cent of new-car sales in the state.
Yet, at the same time, the SA government has joined all other states and territories in supporting Victoria against a High Court challenge to the constitutionality of its introduction of a 2.5¢-per-kilometre road user charge.
The Commonwealth is supporting the challenge. It argues a tax collection of this nature is a Commonwealth responsibility. Just as it is when it comes to collecting and distributing fuel excise.
The trouble is that in the absence of federal action, and if the High Court challenge fails, the states will eventually have to design their own systems to suit their needs – even the myopic bunch in Adelaide.
Fuel excise is a bit like the GST. States with big populations raise more excise than they receive under the allocation. Victoria, for example, has a large population and a relatively short road network.
Queensland, however, has a lower population and a bigger road network to maintain. It could adopt a higher charge than Victoria. We risk a mishmash of road user charges and a failure of federation on par with the rail gauge fiasco.
All of this could be eased if the Commonwealth takes the lead and schedules the introduction of a nationally consistent road user charge.
Politically, it would be easier to do it when those driving EVs are still in the minority, and are not fondly regarded by those without the means to shell out $60,000-plus for a two-tonne road wrecker which the owner operates for peanuts, all while demanding someone pay for more charging stations.
The environmental imperative is important, but one suspects EVs will continue to sell with or without the spectre of a charge that will begin in four of five years’ time, especially if it can be demonstrated a 2.5¢-per-kilometre charge is still cheaper than paying 40¢ a litre.
To soften the sales job, the government should mandate that the fuel excise component be printed separately on petrol receipts, just as the GST is, so motorists can see how much tax they already pay per tank.
If the High Court action succeeds, the Commonwealth will have no choice.
Apart from trying to nickel-and-dime superannuation to find a $1 billion here or there, it should focus on the gaping revenue hole that threatens to appear over the next decade, and keep the states well away.
Extracted in full from: Electric vehicle road user charge: Albanese government must act to fill fuel excise pothole (afr.com)
