Short-sighted, uncoordinated, resource-misallocating, inequitable, environmentally destructive, ham-fisted and unhealthy are just some of the adjectives that apply to Victoria’s decision to impose a 2.5-cent-per-kilometre tax on electric vehicles.

Pretty standard fare for much of Australia’s dumb tax system.

It has been apparent for more than a decade that fuel tax is an unsustainable and inequitable way to fund Australia’s roads and that it should be replaced by a road-user charge. The Henry tax review said as much in 2010.

But applying a crude cents-per-kilometre road-user charge on electric cars is not the best way to do it. Vehicles should not be taxed purely on how far they travel, but also where and when they travel; how heavy the vehicle is; and whether the vehicle is fossil fuel or electric.

The heavier the vehicle the more the road damage. Moreover, the engineers tell us that it is a quad function. Double the weight, and the damage goes up by two times two times two times two or 16 times.

Yet, what does our dumb tax system do? It charges LESS, not more, fuel tax for heavy vehicles. Cars pay 42.3 cents a litre. Trucks over 4.5 tonnes pay 25.8 cents a litre.

The smart thing would be to impose a road user charge on heavy vehicles to make up the difference and more to ensure trucks pay for the damage they do to roads.

Also, the heavier the vehicle, the more damage (both human and material) is inflicted in crashes. Though, to be fair to truck drivers, it is usually the small vehicle which causes the crash.

Victoria’s announcement came without a great deal of detail. We do not know if the charge will be levied by a crude odometer reading and self-assessment with spot checks or whether it will be a full-scale telematics system that heavy vehicles are mandated to use under the National Heavy Vehicle Regulatory scheme.

If telematics can be done for trucks it can be done for cars. The GPS-based systems can monitor where and when a vehicle travelled and transmit the information to the government for billing purposes.

With that sort of data governments can impose road-user charges far more intelligently. A peak-hour journey to a CBD would cost much more than a midnight trip on a rural road. The former has greater costs because of pollution in densely populated areas and because of congestion which creates economic inefficiency.

It should be a national scheme. That would take care of problems with charging Victorian-owned and garaged vehicles for the time spent on roads interstate.

At present, fuel tax is a federal tax. In 1997, the High Court held that the then tobacco, fuel and alcohol state levies were unconstitutional excise taxes. The Constitution provides that the levying of excise taxes is the exclusive province of the Commonwealth Parliament. Since then the Commonwealth has levied the taxes and returned them to the states proportionately.

Road-user charges are different. States are constitutionally permitted to charge people for the use of the states’ assets, like roads.

However, if one state attempted to levy an extra road-user charge on heavy vehicles, the Commonwealth would probably discount that state’s fuel tax share. So, it would have to be done by all states to work.

That is why the federal and all the state and territory governments should sit down and prepare a sensible transition to raise money from what will inevitably become a mostly electric fleet over the next decade.

Alas, time and time again, the Federal Coalition goes into paralysis over anything to do with carbon, the environment or efficient and equitable taxing arrangements. Big-polluting mates and donors always come first. Big business always comes before small business and wage and salary earners.

And now a state Labor Government is going to add to the mess.

Fuel tax does not come near the cost of maintaining roads. Cars are getting more fuel efficient so pay less and the lower fuel tax on heavy vehicles makes rail less competitive, thereby encouraging greater use of road-damaging trucks.

Fuel tax (or a blunt odometer-base road-use charge) is unfair to (usually low-income) people with older cars. It is unfair to rural and regional Australians who have to travel greater distances to shops and services.

We should be encouraging the change to electric vehicles, not hindering it. Other countries pay subsidies for electric vehicles, in the sure knowledge that the take-up and the benefits that come with it will be faster. What does dumb Australia do? We impose a GST, stamp duty and a luxury-car tax and now a road-user charge on electric vehicles.

Electric vehicles with GPS-based charging promises huge benefits: less inner-city pollution and congestion; lower need for new and wider roads; safer rural roads and more freight going on rail; and greater fairness as people would be charged according to the cost of their travel.

Also, a monthly bill for road use would send a price signal to users who would be encouraged to use public transport, ride-share, cycle or walk for more journeys.

The transition to telematics (whether on fossil or electric vehicles) would have to be well managed. Fuel taxes would have to be gradually cut to zero (the GST would still apply). As they were reduced, registration on vehicles without GPS telematics fitted would rise. Those with telematics would get a large registration discount in the first year to defray the cost and would pay a much lower rate than vehicles without telematics thereafter.

The subsidies would pay for themselves quite quickly in lower road maintenance; health; and less dependence on foreign fuel imports.

Finally, GPS telematics could provide information to insurance companies (including breaches of the speed limit). Good drivers would pay lower premiums, thereby encouraging safer driving.

Why can’t Australia apply more brainpower to tax (and other) policy and reap the obvious benefits instead of pandering to fossil-fuel dinosaurs? Surely, we are better than this.

This article first appeared in The Canberra Times and other Australian media on 28 November 2020.


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