Is Australia’s fuel excise model outdated?

By September 3, 2018 Uncategorised

A recent report has shown plunging returns on the fuel excise tax in recent years, raising questions on how fleets and private drivers ought to be paying for their road usage.

Data from the Parliamentary Budget Office showed that revenue from the fuel excise towards the GDP has fallen a staggering 30 per cent from 2001-02 to 2016-17 (from 1.6 per cent to around 1 per cent).

Meanwhile the debate around electric vs petrol vehicles has garnered further division across the market, given motorists are effectively paying 40.9 cents to the government for every litre of fuel they put into their traditionally powered vehicles. On the flip side, EV users typically don’t provide any ongoing revenue into the coffers given they aren’t purchasing any fuel to power them.

According to Adrian Dwyer, chief of Infrastructure Partnerships Australia, the current system needs a long-term rethink.

“Right now, there is a burning platform,” he said.

The solution currently being debated within the industry and being backed by Mr Dwyer, is that of a of a ‘user-pays system’ where drivers would dynamically pay based on their overall road usage, much like a monthly mobile phone or energy plan. The basis behind the proposal would be to even up limitations in the market where poorer drivers of old cars are effectively subsidising richer drivers of electric vehicles.

“If you drive a 10-year-old car, a 10-year-old Commodore, you’re paying a lot more than someone who drives a Toyota hybrid, a Prius, and if you’re driving a Tesla you’re not currently making a contribution at the point of use,” he said.

But would this simple ‘drive more, pay more’ proposal actually work in Australia? Our market has typically been a laggard in electric vehicle uptake for a number of years – especially true given EVs currently make up a paltry 0.2 per cent of our nation’s fleet, compared with the 2.0 per cent global average. As it stands EVs road users also face a variety of on-road costs – in most cases effected by the luxury car tax once passing the $75,526 threshold (currently $66,331 for standard vehicles).

Behyad Jafari, from the Electric Vehicle Council remained conscious that while a road pricing of some form was inevitable for EVs there needs to be something in it for consumers to make the plunge to EVs overall more appealing.

“What we don’t want is a situation where we create a further disincentive for people to get into electric cars,” he said.

Jafari was also quick to note that it was easy to neglect the huge benefits that electric vehicles are bringing to the market, both environmentally and from an economic viewpoint.

“People who are driving electric vehicles are already providing a lot of advantages to Australian society,” he said.

“Every electric vehicle on the road means healthier people, means less impact to our environment and helps our economy by using a fuel source that we produce here.”