Treasurer warned against 'knee-jerk' tax policy on EVs

The Tax Institute has warned the government that introducing a road user charge based on kilometres driven is likely to raise issues with the complexity and reliability of data, and should be properly considered.

Last week, The Australian reported that Treasury had been asked by the government to undertake modelling on a national road user charge as it finalises its broader tax package ahead of the budget.

John Storey, tax counsel at The Tax Institute, said the policy should not be adopted as a "knee-jerk reaction" to declining fuel excise.

"The government needs to be clearer about its policy on EVs. On the one hand, there are currently extremely generous FBT exemptions for EVs that don’t apply to other vehicles and encourage EV ownership," Storey said.

"However, on the other hand, the government is now seeking to tax their use."

Before introducing yet another tax on consumers, particularly one that raises serious practical issues, a thorough review of the overall tax arrangements for all vehicles and the funding of road maintenance should be conducted first.

Storey acknowledged that, under the current tax framework, there is a level of unfairness, given that only some motorists pay the fuel excise and contribute to the maintenance of roads used by everyone.

However, Storey said he was critical of the government's sudden, unexplained introduction of this measure.

The Greens party have also slammed the proposed EV tax policies being considered by Labor, which it said will slow down EV uptake and keep Australians vulnerable to oil shocks.

If these policies are implemented, the Greens said Labor would slow down Australia's transition off oil imports, keep Australia more exposed to global oil upsets and keep transport costs high for Australian motorists flailing under cost-of-living pressures.

Australian Greens leader Larissa Waters said Australia was at the beginning of what would be a deep and prolonged oil shock.

"Billionaires started an illegal war, oil and gas companies are reaping mega profits, and regular people are paying the price," she said.

“It boggles the mind to see the government working up ways to slow down the transition off imported oil. Labor should not need reminding we are staring down the barrel of an oil crisis worse than the twin shocks of the 1970s and the war in Ukraine combined."

Waters questioned why the Treasurer and energy minister were "working up a full body slam against the cleanest and cheapest cars to run available to Australian motorists right now".

“We should be looking at ways to incentivise EV uptake and make them cheaper so more people can afford one, not making them more expensive during a fuel crisis," she said.

“One of the many lessons Labor should take from this crisis is we have to reduce the reliance on imported oil in our economy. Instead, the Government is driving us in the wrong direction up a one way street.”