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Should electric cars be taxed? Australian states at odds over EV taxes as NSW considers plans

NSW will take a more "holistic" approach to taxing electric vehicles.

The NSW government’s treasurer has appeared to back away from an immediate EV tax in comments to media, after previously expressing enthusiasm for adopting a similar system to the one which has been outlined in the budgets of other states.

In Victoria and South Australia, a specific tax for electric vehicles has been included in each state’s budget, as widely panned by the Electric Vehicle Council (EVC), environment groups and media. The taxes are the first of their kind in the world to specifically target EVs.

The taxes have been justified as a response to falling fuel excise and the need for all road users to pay for the roads they benefit from, however it is widely recognised that fuel excise tax is not quarantined for roads, but in fact goes to general revenue.

In comments to the media, the NSW treasurer Dominic Perrottet said such a tax will not be instituted in NSW, at least until there is more take-up of electrified technology on roads.

“Over time, people who use the roads should pay for the roads, just like they do with fuel excise, but what we don’t want to do is impede innovation and take-up,” he told The Sydney Morning Herald. “We’re working on a holistic package to announce in the budget.”

This apparent step-back from Mr Perrottet’s previous comments supporting the idea of an EV tax in the budget was welcomed immediately by the EVC, which represents 71 industry stakeholders.

“We respect the NSW treasurer’s consultative and thoughtful approach on meeting this challenge,” EVC CEO Behyad Jafari said.

While ultimately conceding that “done well, road-user charges are a sensible way forward”, Mr Jafari said they should not “be introduced in a way that encourages people to stay in oil-thirsty vehicles”.

“That’s unfortunately what Victoria’s blunt EV tax will do, and it is a trap Mr Perrottet has thankfully avoided in his state,” he added.

The NSW government is expected to reveal its full EV strategy imminently, but Mr Perrottet said it would not be in the half-yearly review as his “thinking hadn’t settled” on the matter.

NSW's EV taxation strategy will be at odds with Victoria's. NSW's EV taxation strategy will be at odds with Victoria's.

The NSW government has a target of net zero emissions by 2050 and a goal to have one of the largest EV fleets in Australia. It has mandated that 30 per cent of its own fleet will be electric or hybrid by 2023, with at least 10 per cent being all-electric. It has also committed $3 million to fast-charging infrastructure on regional corridors and $2 million for charging points in commuter car parks.

It is also developing incentives to help commercial fleet operators transition to EVs to “help fast-track the transport sector to net zero emissions by 2050” in spite of a lack of a similar commitment by the federal government, which has been called for by manufacturers including Kia and Volkswagen.

As upfront cost is still the key disincentive for consumers when it comes to EVs, a healthy secondhand market as stimulated by large government and commercial fleets is necessary for the technology to be more widely adopted. Without government incentives rather than taxes, the pressure is on vehicle manufacturers to sustain the availability of slow-selling models in the meantime.