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Labor’s tax on electric vehicles ‘worst in the world’

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Samantha Ratnam
Leader of the Victorian Greens
16 March 2021

Sadly, last night, the Labor Government’s tax on electric vehicles passed Parliament. This tax has been called ‘the worst electric vehicle policy in the world’ in an open letter by 25 organisations.

At a time when we should be encouraging a rapid switch to cleaner, electric vehicles, this government is doing the opposite.

Here’s what I had to say about it in Parliament:

Dr RATNAM: I rise to make a contribution on the worst EV policy in the world, because that is what we have in this bill: a regressive, backwards tax that will suppress uptake of electric vehicles in our state and hinder action on climate change; a policy that makes electric vehicles more expensive when we should be doing everything we can to make them cheaper and more accessible to all Victorians; a barrier to the uptake of cleaner cars that will lock us into years and years of polluting petrol and diesel cars, increased transport emissions and dirty air; and a bill that penalises those drivers trying to do the right thing by abandoning polluting cars in favour of the cleaner and greener alternative. Make no mistake: this bill is a poorly designed and harmful cash grab, pure and simple. It seems to be driven more by an obsession on the part of the Treasurer with bringing the budget back into surplus than by any actual policy or evidence. Taxes always have impacts beyond revenue raising, and good taxes are designed to encourage behaviour we want to encourage and discourage what is harmful. This tax does the opposite.

I come to this debate as an EV driver but more importantly as a former councillor that saw firsthand how hard it is to increase EV uptake in our community. Our council at Moreland had a steadfast and ambitious commitment to do its part in the fight against climate change. Along with making it one of the first carbon-neutral councils in all of Australia, we aimed to drastically reduce carbon emissions across the community and became pioneers of the electric vehicle movement in Australia. We did this by making it easier for people to drive an EV. With purchase prices still being much higher than those for fossil-fuel cars, we did all that we could to offset these costs, alongside free charging, a network of charging stations and a community education campaign.

Even with all these investments and incentives, it was hard to drive EV uptake, and we know that that happened for a range of reasons, one being the up-front cost of vehicles. However, there are many people who will invest in an electric vehicle because it is better for the environment. For many of these folks the support to bring down the running costs of EVs was a factor in their choice to pay the up-front costs. The life-cycle costs are factored into people’s decisions to purchase an electric vehicle, so it is nonsense to try and minimise the financial impact of this tax. I know from firsthand experience that this will undermine our uptake of EVs and our move towards reducing transport emissions.

The kind of transport system I want to see in our future is not one where roads are congested with fossil-fuelled cars but rather one where public transport, trams, buses and active transport like cycling and walking are prioritised and those needing to drive private vehicles are driving electric vehicles fuelled by renewable energy, with plenty of charging stations available. And I know the government agrees with me. In his second-reading speech the Treasurer spoke about the need to decarbonise our transport system, and he rightly noted that EVs are the future of transport in Victoria and will play a major role in transitioning to a greener economy. But if electric and hybrid vehicles are our future, then why on earth are we making it harder for people to switch? Imposing a special tax on electric and hybrid vehicles is only going to suppress EV purchases in Australia. It is going to make EVs more expensive, it will unfairly target drivers who want to do the right thing for all of us or those who live in transport blackspots like our regions and it is going to undermine action on the climate crisis in our state.
It is especially disappointing to see this coming from the government when Australia is already lagging behind the rest of the world on electric vehicles. Globally, most jurisdictions are taking active steps to encourage more people to switch to electric vehicles. They understand that taking meaningful action on emissions means phasing out petrol and diesel and shifting to cleaner cars, and these measures are paying off: 2.6 per cent of all car sales globally are electric vehicles. In the countries who are actively encouraging their drivers to switch the rates are even higher. Around 10 to 40 per cent of new car sales in European countries are EVs and hybrids. In fact in Norway more than 70 per cent of all new cars sold last year were EVs.
Here in Australia, however, EVs are still only a mere fraction of our car market. Electric car sales make up just 0.7 per cent of all car sales in the country. When Australians buy more than 1 million new cars every year, these numbers are embarrassing. Yet instead of following the lead of the rest of the world, our government is going in the opposite direction. Here in Victoria we have the only government in the world making electric vehicles more expensive and more difficult with an administrative burden on every driver, a move which is just going to put people off purchasing a new electric or hybrid vehicle. When the Greens surveyed almost 1000 Victorians, we found that the overwhelming majority, 97 per cent, were interested in making the shift to an EV, but most of them, 78.3 per cent, said that they would be deterred by this proposed tax.

The government’s attempts to sweeten the deal with small incentives at the same time as introducing a special tax on exactly the car they are trying to convince Victorians to switch to are counterintuitive, and the incentives themselves are tokenistic at best—a subsidy of up to $3,000 for only 20,000 cars. When other jurisdictions are offering five times as much—the Labor-Greens ACT government, for example, has free registration for EVs and $15,000 loans to encourage uptake—the paltry offering from this government is just embarrassing. In fact how noteworthy that the Greens-Labor ACT incentives package starts today, the day we are debating taking Victoria in the opposite direction. When these incentives come hand in hand with a brand new tax on all electric and hybrid vehicles, they do not mean much, especially when incentives can be created and taken away on the whims of the government but the tax set up by this legislation will remain. I would note that members of the crossbench have indicated that they are willing to support the EV tax if the government also introduces a sizeable incentives package to encourage uptake despite the tax. I would ask those members: is $3,000 for only 20,000 cars really enough?

Introducing a tax on zero-emission vehicles is particularly absurd in the context of a climate crisis, especially when passenger petrol and diesel vehicles are a major contributor to emissions in our state. Transport emissions are the fastest growing source of emissions in Victoria. Over 20 per cent of our emissions come from the transport sector, second only to our dirty coal-fired power plants, and the biggest contributor to transport emissions is private cars. Transitioning to a fully electric-powered transport network is a necessary part of action on the climate crisis. The Electric Vehicle Council has noted that if everyone in Australia drove a battery EV we could eliminate 6 per cent of our total greenhouse gas emissions. In a climate crisis surely a sensible transport policy would be to encourage more consumers to adopt cleaner ways of getting around, to invest in more public and active transport and to encourage more people to make the switch to electric and hybrid vehicles. So why are we instead punishing those very drivers who have made or are making the switch?

Other places around the world are getting out of petrol and diesel completely, like in the UK, where the sale of petrol cars will be banned from 2030. Closer to home, the ACT government will soon have an entirely electric government fleet, but in Victoria we are about to hit those drivers who are doing the right thing for our environment with a special tax—a tax on being green, a tax on clean air. Along with the federal government’s inaction, the Victorian policy will see us becoming the dumping ground for the polluting cars that the rest of the world no longer wants. We are running out of time. If we are to take meaningful action on the climate crisis, we cannot wait any longer. We have to encourage the wholesale shift away from polluting cars to electric vehicles now. We need to immediately electrify our public transport system, not in four years but now, and we need to encourage more people to use sustainable forms of transport by investing in public and active transport. Australia’s lack of climate policy is already a global laughing-stock. Victoria’s EV tax will soon also gain the dubious honour of being ridiculed by the rest of the world.

It is not just the Greens who oppose this bill, however. This tax has been roundly criticised by environmental groups, economists, the EV industry and other governments, and I have been emailed by thousands of Victorians who are appalled that the government is suppressing the growth of the EV industry in our state and are asking this house to oppose this tax and instead to push for proper incentives for EVs. Let me read you some examples. Environment Victoria called the tax a backward step, and noted that Victoria is the only state actively trying to discourage electric vehicle use. The Electric Vehicle Council drew the following analogy:

If you’re collecting less tax from cigarettes, you don’t respond by slapping a big new tax on nicotine gum. Victorian drivers who make the choice to clean the air and reduce carbon emissions should be encouraged, not punished.
Major vehicle brands like Volkswagen and Hyundai have also condemned the tax, joining with 23 other organisations in an open letter to decry the proposed tax as the ‘worst electric vehicle policy in the world’. Even this government’s federal counterparts oppose this move. Anthony Albanese called this tax absurd.

This government knows it is going alone on this tax, which is why it is trying to pull the wool over the eyes of MPs in this chamber and people in the community about the fuel excise and roads. The claim that this tax is about requiring drivers of electric vehicles to contribute to their use of the roads in the same way that petrol and gas vehicle drivers do through the fuel excise is made by the government, but this is calculated misinformation as an attempt to justify a bad tax.

All of us here know how the fuel excise works. It is a federal tax that goes straight into general revenue, which is used to pay for a range of things the federal government provides. The fuel excise has not been used to pay for road maintenance for decades. Instead road maintenance is largely funded by local government. More than 80 per cent of the total Australian road network is managed by local councils, who cover maintenance through local rates. In fact, as economist Richard Denniss has pointed out, the fuel excise has never really been about charging a fair price for the use of a road. A heavy vehicle like a truck can do up to 20 000 times as much damage to a road as a private passenger car, but right now trucks pay a far lower rate of fuel excise than private passenger cars do. And the trucks that do so much of the damage will not be paying the EV tax. In fact, as Richard Denniss further argues, this is a tax that entrenches the tax burden on individual drivers and leaves big businesses off the hook. The big oil companies have done their job well. It is an inequitable tax as well as a climate-denying tax.

The Greens are supportive of the idea of a fair road user charge. A well-designed road user charge has the potential to reduce traffic, speed up travel times and reduce emissions. But this is not a fair road user charge. In fact if this bill passes today, there goes any chance of a well-designed, equitable road user charge in the future. Anyone who believes this is the first step towards a better road charging system is naive.

The tax has also been designed in a way that means it will affect certain types of drivers more than others. As the tax is levied by distance—2.5 cents per kilometre for EVs and 2 cents for hybrids—those who have to travel further distances will end up paying more. It means that those who live in public transport blackspots and rely on cars to get around, like in our long-neglected western suburbs, will be unfairly penalised by this new tax. It also means the owner of a super-expensive hybrid will pay less than someone buying a cheaper electric vehicle. It also means regional drivers will be disproportionately affected. I would remind members of this place that we recently held a regional sitting of this Parliament. In the spirit of that meeting, we cannot commit to doing better for regional Victoria in one week and then turn around and hit regional drivers with a special regional car tax the next.

There is one more element of this tax I wish to address—that is, the likelihood it will be used by the government to make the sale of VicRoads more attractive for investors, as canvassed in this debate this afternoon previously, especially as the part of VicRoads that the government is selling off will be administering the EV tax. The Greens have put on record many times our opposition to the government’s privatisation agenda. Essential public services should remain in public hands. Victoria has suffered enough from privatisation. If indeed it turns out that some private equity firm gets a slice of this revenue through some deal, then it is an even worse proposition.

So if it is not about road user charges or road maintenance or fairness, then what is this tax about? It seems it is more about raising government revenue. But there are plenty of ways to deliver more revenue. In fact we saw some of those in last week’s budget: fair, progressive taxation that targets wealthy landowners and unearned wealth—things like the new windfall gains tax, which the Greens have been calling for for years. These are the kinds of revenue policies we want to see the government pursue, not badly designed taxes that will undermine action on climate change.

The Greens will work to repeal this tax on electric vehicles.

Sign up here to join the campaign.

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Samantha Ratnam
Leader of the Victorian Greens
16 March 2021
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