The state of Victoria in Australia introduced a 2.5 cents per km charge for electric vehicles using public roads in the year 2021. This was introduced to compensate for the loss of fuel excise revenue from the shift towards electric vehicles. This was a slap on the face of buyers who were buying the idea to reduce carbon emissions by buying an electric vehicle. Well on 18th Oct 2023 the high court’s verdict on cancelling victoria’s EV tax was a slap on the wrist of Victorian government trying to behave irrational by stepping above the law of nation and abusing with constitutional rights of Victorians.

The Unconstitutional Tax

The Australian High Court has made a groundbreaking ruling regarding Victoria’s EV tax, deeming it unconstitutional. This court’s verdict, its implications for the EV industry, and the state government’s obligation to cover the costs. EV owners do not purchase petrol or diesel to run their vehicles. The excise which was collected by government on the sale of fuel i.e. petrol or diesel was use to pay for road maintenance. The introduction of tax certainly deter some buyers in the adoption of EV’s.

The Court’s Decisive Ruling

The High Court determined that Victoria’s tax is not merely a “licence or permit fee” for regulated activities, as the state argued. Instead, it’s viewed as a tax on the use of electric vehicles, a power reserved for the federal government.

Dissenting Opinions

Although the majority of the court agreed with the ruling, three of the seven judges dissented, highlighting the complexity and controversy of the issue. Buyers of petrol and diesel use the fuel not just for daily commute, but they also use it for business and recreation. There are environmental costs associated with the use of these hydro carbons, carbon emissions, health issues – these also impact the society. Are internal combustion engine users paying for these hidden costs?

Champions of Clarity

This case was brought to light by electric vehicle owner Chris Vanderstock and engineering consultant Kathleen Davies, who challenged the state’s authority to impose this tax. Their victory is seen as a landmark constitutional decision.

The ruling not only invalidates Victoria’s electric vehicle tax but also sets a precedent that may discourage other states from implementing similar legislation.

Kathleen Davies expresses her optimism regarding the ruling’s potential to prompt the federal government to develop a national policy on EVs and road taxes. She highlights the necessity of a fair and equitable system that doesn’t hinder EV adoption or decarbonization.

The High Court details on this case are available at this link.

Consequences of the Tax

Chris Vanderstock believes that the tax discouraged Victorians from purchasing EVs and penalized existing EV owners. It was seen as a disjointed policy that hindered collective efforts to reduce emissions from transport.

Key Points of the Ruling

The majority judgment focused on two critical elements. Firstly, it assessed whether the Victorian tax increased the cost of goods to consumers, making it a federal matter. Secondly, it noted that the tax wasn’t based on a specific item, like petrol, but applied to all electric vehicles, even when not in use.

A Broader Perspective

While road taxes for EVs are inevitable, the timing might not be right for Australia. Behyad Jafari, CEO of the EV Council, emphasizes the need for a national approach to road user taxes that considers the economic cost of emissions.

A Positive Standstill

The High Court’s decision is celebrated for preventing states from imposing taxes on EV owners without a comprehensive national strategy. It avoids the risk of deterring potential EV buyers, as witnessed in South Australia’s case.

What Lies Ahead

The issue of road user taxes for electric vehicles is far from resolved. States may seek alternative revenue sources, while the federal government could step in to bridge potential budget gaps.

Potential Repercussions

The ruling’s implications reach beyond the EV tax. It raises questions about other state taxes, like stamp duties, potentially coming under scrutiny and being ruled unconstitutional.

This court case epitomizes the clash between state and federal authorities over the right to impose road user taxes in a future where fuel excise disappears with the transition to electric vehicles.

Victoria’s EV road tax, criticized for its complexity and unfairness, has been a contentious issue for EV owners. It led to registration issues for many who failed to report odometer readings.

Conclusion: Charting the Road Ahead

The High Court’s verdict on Victoria’s EV tax is a pivotal moment in the ongoing debate about road user taxes for electric vehicles. It not only safeguards the interests of EV owners but also emphasizes the need for a nationally coordinated approach to these taxes. The ruling’s broader implications will undoubtedly impact the future landscape of state taxation and pave the way for more equitable policies.

FAQs

1. What was the basis of the High Court’s ruling on Victoria’s EV tax? The High Court ruled that Victoria’s EV tax is unconstitutional because it’s considered a tax on the use of electric vehicles, a power reserved for the federal government.

2. How does this ruling affect other states in Australia? The ruling sets a precedent that is likely to discourage other states from imposing similar taxes on EV owners.

3. What is the potential impact of the ruling on other state taxes? The ruling raises questions about the constitutionality of other state taxes, such as stamp duties, which may come under scrutiny in the future.

4. Will EV owners receive refunds for taxes already paid? It’s unlikely that road taxes already paid, or penalties for not paying, will be refunded.

5. What’s the future of road user taxes for electric vehicles in Australia? While road taxes for EVs are inevitable, there is a need for a national approach that considers the economic cost of emissions and ensures fairness and equity.