The AFR View
Buck for EV road charging stops with Labor
Setting up the tax system for the transition to cleaner vehicles should form part of the needed bigger discussion about cleaning up the nation’s creaking and unsustainable taxation system.
By striking down the Victorian government’s road-user charge tax on electric vehicles, the High Court yesterday ruled by a 4-3 majority that only the Commonwealth, not the states, has the power to make such laws under Australia’s Constitution.
With state governments now lacking the legal power to follow Victoria down the path of charging EV drivers to pay for the roads they use, and with the Feds having backed the legal challenge to state taxing powers, the Albanese government now must take responsibility for implementing a national road user charging system.
Electric vehicle owner Chris Vanderstock has successfully taken the Victorian government to the High Court. Chris Hopkins
That should also prompt Labor to take up the mainstream tax reform thinking that has lain dormant in Canberra for over two decades.
The finer points of constitutional law on which the majority judgement turned, and the doubt that now hangs over other state charges and hence the distribution of tax powers in the federation, will be dissected by the learned friends’ fraternity.
We won’t question the legal reasoning, which a dissenting judgement suggests may problematically neglect economics and longstanding precedent. But the reality is the split decision, interpreting a constitutional charter drawn up over a century ago in the horse and buggy era, has set back the task of making road taxation fit for the clean energy future.
The number of cars and trucks powered by charging points rather than the bowser will accelerate in the coming decades on the road to net-zero emissions by 2050. The Commonwealth’s petrol and fuel excise – which serves as a proxy road user charge and is partly hypothecated to pay for road construction and maintenance – will need to be replaced with low-carbon user charges that underpin more efficient use of the road network.
Despite the 2010 Henry Tax Review recommendation to switch to an economically efficient road user charging system, both sides of the politics in Canberra let the issue drift.
The whole question of EV road charging illuminates Australia’s worsening problem of taxing some things too much and other things not enough.
The longer the wait, and the more people drive EVs, the harder the political challenge will be to impose what will inevitably be cast as a “new tax”. Victoria and South Australia took the initiative by introducing per-kilometre road user charges for electric vehicles.
The SA scheme was scrapped by the new Labor government led by Premier Peter Malinauskas amid protests from the EV and climate lobby that a new tax would slow the shift away from fossil-fuelled carbon-belching vehicles.
The irony is that EV road user charging is a first step towards using a price signal to manage congestion, promote the efficient use of roads and other transport infrastructure, and lower the nation’s overall carbon footprint.
The High Court case brought by two EV drivers has now invalidated Victoria’s scheme and almost certainly kiboshed NSW’s road user charge system due to start in mid-2027.
Having granted EVs an exemption from fringe benefits tax to encourage take up, the onus is on Labor to stop people who can afford to drive Teslas from getting a free ride on the roads being paid through fuel excise on the soaring cost of petrol by those who can only afford more modest conventional rides.
The road tax debate is back at square one. Yet Labor came to office with no tax policy to speak of anyway.
The High Court ruling has also further narrowed and cast legal uncertainty over the state governments’ narrow tax base.
That is already showing up in ad hoc state land tax imposts on property investors, arbitrary mining royalty hikes, and mental health payroll levies.
Alongside Labor’s tax raid on big superannuation balances, there is no set of coherent tax principles guiding the direction of the system.
The structural tax reform problem has been repeatedly diagnosed by the Henry Review, Joe Hockey’s 2015 Re:think discussion paper and multiple Productivity Commission, IMF and OECD reports.
Too much of Australia’s tax burden falls on productive work and investment through economically damaging personal income and corporate taxes and too little is borne by more efficient taxes on consumption and land.
The whole question of EV road charging illuminates Australia’s worsening problem of taxing some things too much and other things not enough.
Yet both major parties have failed to progress any major tax reform since the Howard government’s introduction of the Goods and Services Tax three months before the Sydney 2000 Olympics.
Setting up the tax system for the transition to cleaner vehicles should form part of the needed bigger discussion about cleaning up the nation’s creaking and unsustainable taxation system.
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