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The future of electric cars in Australia

Truth has a tough job dispelling fiction, a ‘good story’ is always more appealing. However, this article sets out some statistical data gathered over five years from a case study on a Mitsubishi Outlander Plug-in Electric Vehicle (PHEV), Australian Bureau of Statistics (ABS) and Australian Taxation Office (ATO) statistics, to present findings of the impacts of transitioning from internal combustion engine (ICE) powered vehicles to electric vehicles. There is also a factor of tax implications leading to how tax could be legitimately avoided by transition from the old smoky ‘clunker’ to the 21st century electric vehicle (EV), writes Dr Lex Fullarton FIPA.

The future of electric cars in Australia
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  • Dr Lex Fullarton FIPA
  • September 02, 2021
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Firstly, in 2016, a newspaper article asserted that: Australians who drive Holden Commodores are paying three times as much tax for federal roads as those who own hybrid vehicles such as the Toyota Prius, sparking fears of a funding crisis that could keep every motorist in the slow lane for years. Wealthier Australians who can afford to buy hybrid and electric cars are starting to erode the $12 billion in annual fuel excise that pays for the nation’s roads, forcing the federal government to look at new ways to raise cash for major projects.

Since then, not much has changed in the perception that EV owners will unfairly benefit at the expense of ICE powered vehicles as they will avoid the fuel excise placed on motor vehicle spirit. In April 2021 it was reported that: The Victorian government is planning to introduce road usage fees of 2.5 cent/km charge for electric and other zero-emission vehicles, including hydrogen vehicles, and a 2.0 cent/km for plug-in hybrid-electric vehicles.

The article stated that: The [Victorian] state government has argued the tax will make sure electric car users contribute to the cost of maintaining roads.

Therefore, it appears little has changed in the common belief that fuel excises are hypothecated to the construction and maintenance of Australia’s roadways, and that the transition to EVs will result in that source of government revenue diminishing to the point where the funding crisis will no longer support the cost of roadways and they will fall into disrepair.

That is a false belief. Hypothecation (allocating tax revenue to a particular expenditure) of fuel excise to the construction and maintenance of Australian roadways has not been applied for over 60 years.

In 1959, the Commonwealth government removed the nexus between revenue raised from ‘the collections from time to time of the duties of customs and duties of excise’ and ‘the construction, reconstruction, maintenance and repair of roads or on the purchase of road-making plant’. The Commonwealth Aid Roads Act 1959 (Cth) differed from its predecessors in that it provided for a tied financial grant of £220 million over five years (1959-63).

The 1959 legislation made no reference to the collection of customs or excise duties to fund those grants. Speeches made in support of, and opposition to, the Commonwealth Aid Roads Bill 1959 make it quite clear that the nexus between revenue derived from the petrol tax and grants to road funding was at an end.

Secondly, even if road tax revenue was hypothecated to roadway construction and maintenance, at the current rate EVs are being rolled out in Australia it will be decades before fuel excises will be impacted significantly.

In 2016, ABS data showed that the total number of motor vehicles registered in Australia rose 12.33 per cent from 16,368,383 in 2011 to 18,387,136, in 2016.

That number continued to rise to 18,824,136 in 2020, however the rate of growth slowed from 12.33 per cent over the five years 2011-16 to just 2.38 per cent over the four years 2016-20. On the other hand, the ABS motor vehicle census of 2020 reveals that of all vehicles registered in Australia only 15,688, or just 0.065 per cent, were classified as electric.

That number is extremely modest when compared to the total number of registered vehicles of more than 20 million from 2013 onwards. Table 1 shows the growth of licensed electric vehicles on Australian roads for the years 2013-20. It appears the authors of the articles and the Victorian government are considering economic influences in isolation.

If viewed solely from an economic perspective, then Australians should be encouraged to take up drinking alcohol, smoking and gambling. The taxes raised from those three ‘social evils’ are considerable. It is reported that the 2019-20 budget: predicts revenue from the tobacco tax at a staggering $17.4 billion. That’s a lot of money compared to the expected surplus of $7.1 billion. It’s more than the $12.3 billion from diesel fuel, $6.4 billion from petrol tax, and the roughly $6 billion from alcoholic beverages.

In 2018 the tax revenue from gambling was $6.2 billion. That is a total of around $29 billion per annum. However, the net revenue, after rebates, from fuel excise in 2019 was less than half that.

Of course, that proposal is nonsense when the social and environmental damages are considered. The raising of tax revenue must be considered in the broader perspective of the increased medical and hospitalisation costs incurred by the broader population by way of treatments for cancer and alcoholism. The social, and ultimately economic costs, of domestic violence and other negative social impacts are incalculable. Hence the government campaigns against alcohol, tobacco and gambling addictions. The opportunity cost of lost tax revenue is rarely, if ever considered.

Significantly, as shown in Figure 1, Australians are the highest greenhouse gas emitters in the OECD on an individual basis.

As to the contribution of road transport to the total national emissions, Figure 2 shows that the total national emissions have plateaued since 2010, but not declined. The road transport component has actually risen from 14.5 per cent in 1990, to 16.43 per cent in 2010 to 18.06 per cent in 2018.

Gains achieved in other sectors, such as the roll out of dispersed solar photovoltaic electricity generation to displace fossil fuels in the electricity generation sector, appear to have been negated by the rise in GHG emissions in the transport sector.

The data indicates that significant reductions in national GHG emissions could be achieved by focusing on the transport sector, through the transition to electric vehicles and hybrids, which will reduce the use of fossil fuels in that sector and the reduction of GHG emissions generally.

This paper suggests that the need to transition to electrification of the transport sector has reached a critical stage, and can no longer be ignored by Australia’s parliaments.

Installing solar pv systems on homes and businesses to charge EVs and PHEVs not only avoids fuel excises but employees could renegotiate employment agreements to reflect ‘payment in kind’. Reductions in assessable income to purchase non-work-related expenses (travel to and from workplaces) can benefit employers as well.

We get to breathe less diesel particulate, and other toxic gases, and generally lead a healthier lifestyle, with less medical problems, which saves on government supported medical and hospital resources.

This article argues that there is far more to be gained by moving to renewable energy charged electric cars than the loss of a few billion dollars in foregone tax revenue, which is not allocated to roadway construction and maintenance in any event.

 

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