Governments in Australia are considering how to accommodate the accelerating advent of electric vehicles (EVs) into the Australian market.
A ‘drying up’ of excise tax-based road revenue sources appears to be a major concern, as will inevitably happen with the accelerated transition globally to EVs.
Consideration is being given to the capacity of the Australian government (the Commonwealth government) to fund road spending if the petrol excise tax is eroded. In response, the Treasurer of New South Wales recently said the state would consider policies to ensure road user and road funding charges would continue. And the state of Victoria is considering similar.
We believe petrol excise and road revenue concerns are grossly misplaced and that actions by the Commonwealth need to accelerate while the States should stay clear of the issue.
The Australian government is well placed to deal with the revenue impact of a move to EV’s. Net of rebates, petrol and diesel excise taxes have been falling in real terms since the late 1980’s. They are now 2.2% of revenue.
Further, the Australian government does not use excise taxes to fund road spending. On average the majority of fuel excise is spent on general government activities. Concerns about the erosion of excise tax revenues seem grossly overstated.
For the states the issue is even clearer: they get no direct revenue from fuel excise. They get the odd road grant. They get guaranteed revenue from GST, including the GST on electricity used to power EV’s. The switch to EV’s could be an enormous boon to the states.