Albanese government seeks to unplug Victoria’s electric vehicle tax

Albanese government seeks to unplug Victoria’s electric vehicle tax

July 15, 2022

Key points

  • The Albanese government has joined a legal bid to strike down Victoria’s electric vehicle tax.
  • The intervention will likely determine the future of road taxes and other charges levied by states that may be unconstitutional.
  • The Commonwealth gets around $12 billion in fuel tax a year, but that will shift to state coffers as more motorists adopt EVs and states levy their own charges.

The Albanese government has joined a legal bid to strike down Victoria’s controversial electric vehicle tax, opening up a fight with states over who will control billions of dollars in revenue collected from motorists.

Attorney-General Mark Dreyfus filed an intervention in the High Court last week supporting two Victorian motorists who are seeking to have the Andrews government’s electric vehicle levy ruled unconstitutional.

Victorian Treasurer Tim Pallas has said the levy is a fair way for EV drivers to pay their share of tax. Credit:Joe Armao

A spokesman for Dreyfus said the attorney-general intervened in the case because it had “potential implications for longstanding constitutional principles in relation to revenue and economic policy”.

Electric and plug-in hybrid vehicle motorists pay 2.6¢ or 2.1¢ for every kilometre they drive under the Victorian regime, which the Andrews government implemented 12 months ago despite criticism it would deter people from switching to environmentally friendly vehicles.

With NSW and Western Australia set to introduce their own road charge schemes, the outcome of the case, and Dreyfus’ intervention, is likely to determine the future of road taxes and other charges levied by states that may be unconstitutional.

“The Commonwealth government would like to work with Victoria, and with the other states and territories, on policy relating to electric vehicles,” a spokesman for the attorney-general said. “We think that is best done through governments working cooperatively.”

Engineering consultant Kathleen Davies is one of the plaintiffs taking the Victorian government to court over the electric vehicle tax. Credit:Jason South

Treasurer Tim Pallas has argued the road user charge is a fair way to replace the fuel excise of 44.2¢ a litre that combustion vehicle drivers pay at the bowser (which has been halved until September as a measure to ease the cost of living). But environment groups and carmakers slammed it as one the worst policies of its kind in the world and warned it would inhibit Australia’s already slow shift to no- and low-emissions vehicles.

Two EV drivers, Kathleen Davies and Chris Vanderstock, launched the High Court action in September last year in an attempt to have the road user charge ruled unconstitutional. They argue the charge is an excise, which only the Commonwealth can levy.

Commonwealth and state attorneys-general have the right to intervene on behalf of the governments in court cases involving constitutional issues. Dreyfus filed an intervention supporting that position to the court on July 8, but he is yet to file submissions, while all other states have intervened to support Victoria.

The Commonwealth collects around $12 billion in fuel tax every year, but that will gradually shift to state coffers if more motorists adopt electric vehicles and states levy their own distance-based user charges.

NSW and Western Australia both plan to implement EV road user charges from 2027. South Australia’s government scrapped a similar scheme after coming to power earlier this year.

Davies and Vanderstock are represented by Equity Generation, the law firm that acted for eight teenagers in the landmark climate change court action against former federal environment minister Sussan Ley. Their lawyer, Jack McLean, said the pair welcomed the Commonwealth’s intervention.

Professor Miranda Stewart, director of Melbourne University’s law school tax group, said the EV case would clarify what constituted an “excise” – typically thought of as a tax on goods – and serve as a test case for other state road charges.

She said the states were trying to prepare for the new economy and make sure the tax base is suitable for the future.

“If the states aren’t able to do that, the Commonwealth will have to,” she said. “They’ll probably grant a lot of that revenue to the states – the question is who gets to control that money.”

A spokesman for Pallas said Victoria’s EV tax would ensure a “fair and sustainable revenue base to fund investments in the road network.”

“We’re backing the switch to electric vehicles with a $100 million package of incentives and support for motorists and industry, made possible by the road user charge,” he said.

Environment Victoria’s chief executive Jono La Nauze said he hoped the EV charge was “challenged every step of the way and that these challenges force the Andrews government to rethink its premature tax”.

“The world’s manufacturers are far less likely to send Victorians their best, most affordable, zero-emissions vehicles,” La Nauze said. “This makes things much harder for Victorian families who want to buy and drive electric.”

Electric Vehicles Council CEO Behyad Jafari said the repeal of state EV charges in favour of a nationally consistent reform would be a better way forward.

“The good news there is that like every other state, the Federal government also recognises that the priority isn’t putting taxes on electric vehicles right now,” Jafari said.

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