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Economics Legislation Committee—Senate Standing—COAG Reform Fund Amendment (No Electric Vehicle Taxes) Bill 2020—Report, dated May 2021


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May 2021

The Senate

Economics Legislation Committee

COAG Reform Fund Amendment (No Electric Vehicle Taxes) Bill 2020

© Commonwealth of Australia

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Contents

Members ............................................................................................................................................... v

Chapter 1—Introduction .................................................................................................................... 1

Chapter 2—Views on the bill............................................................................................................ 5

Additional comments - Labor Senators ........................................................................................ 11

Dissenting report - Senator Rex Patrick........................................................................................ 13

Dissenting report - Australian Greens .......................................................................................... 17

Appendix 1—Submissions and additional information ........................................................... 25

Appendix 2—Public hearing ........................................................................................................... 27

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Members

Chair Senator Slade Brockman LP, WA

Deputy Chair Senator Alex Gallacher ALP, SA

(Member from 16 June 2019 - 16 April 2021) (Deputy Chair, 17 June 2019 - 16 April 2021)

Senator Anthony Chisholm ALP, QLD

(Member from 16 April 2021. Acting Deputy Chair from 16 April 2021)

Members Senator Andrew Bragg LP, NSW

Senator Jenny McAllister ALP, NSW

Senator Susan McDonald NATS, QLD

Senator Rex Patrick IND, SA

Participating Members Senator the Hon. Sarah Henderson LP, VIC

Senator Janet Rice AG, VIC

Secretariat Mr Mark Fitt, Committee Secretary Dr Andrew Gaczol, Principal Research Officer Ms Taryn Morton, Administrative Officer

PO Box 6100 Phone: 02 6277 3540

Parliament House Fax: 02 6277 5719

Canberra ACT 2600 Email: economics.sen@aph.gov.au

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Chapter 1 Introduction

Referral of the inquiry 1.1 The COAG Reform Fund Amendment (No Electric Vehicle Taxes) Bill 2020 (the bill) was introduced into the Senate on 10 December 2020 by Senator Janet Rice (Australian Greens) as a private Senator's bill and read a second time on

the same date.

1.2 On 4 February 2021, the Senate referred the bill to the Senate Economics Legislation Committee (the committee) for inquiry and report by 30 April 2021 which was subsequently extended to Friday, 7 May 2021.

Purpose of the bill 1.3 The Explanatory Memorandum (EM) describes the object of the bill is to:

…neutralise the revenue effect of States and Territories that legislate discriminatory taxes or charges against the purchase and use of electric vehicles. The Bill will also financially reward States and Territories that don’t place such barriers to electric vehicle uptake by redistributing the money withheld from non-complying states.1

1.4 The overriding purpose of this bill, as described above, is to prevent the states erecting road blocks to the uptake of electric vehicles (EVs). Transport emissions are around 20 per cent of Australia's greenhouse pollution and EV technologies are, according to the EM, going to be essential for Australia to fulfil its commitments under the Paris Agreement.2

1.5 According to the EM, the bill seeks to neutralise the revenue effect of states and territories that legislate taxes or charges against the purchase and use of EVs. The bill will also financially reward states and territories that do not place such road blocks to electric vehicle uptake by redistributing the money withheld from non-complying states and territories.3

1.6 This bill will insert a statutory condition on grants of financial assistance to the states and territories from the COAG Reform Fund, that will provide that a jurisdiction with a charge against EVs will either have their grants reduced in the following financial year by the amount raised from such taxes and charges in a given financial year or will be required to pay back to the Commonwealth

1 Explanatory Memorandum, p. 5.

2 Explanatory Memorandum, p. 3.

3 Explanatory Memorandum, p. 3.

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an amount of the grant equal to the amount raised from such taxes and charges.4

1.7 On Thursday, 10 December 2020, Senator Rice, in her second reading speech explained further the intent of the bill:

Transport emissions policy matters, because transport is an important sector contributing to our emissions—it makes up around a fifth of emissions in Victoria and New South Wales, and is even higher—a third of emissions—in South Australia. That makes it even more important that we have policies to reduce transport emissions, at every level. Sadly, the complete policy vacuum at a Commonwealth level has contributed to disastrous policy at a state level.

In South Australia, we've seen the Liberal party there make their state the first jurisdiction on the planet that wants to make it more expensive for people to operate electric vehicles.

In Victoria, the government wants to apply a charge to electric vehicles that wouldn't apply to other vehicles, unfairly penalising them and making them more expensive to operate.

In New South Wales, they are actively considering the same terrible ideas as South Australia and Victoria that will make it more expensive for people to operate an electric vehicle.

The reason this is all so unacceptable is that we know that electric vehicles are already more expensive than they should be, and that governments should be doing more to incentivise their uptake. Economic analysis shows that every driver who switches to electric vehicles provides a $1,370 boost to government revenue, and an $8,763 boost to the Australian economy. Keep in mind that's even without a price on carbon, based on current settings. Converting just a quarter of Australia's fleet to electric vehicles would deliver a $4.4 billion economic benefit—again, in a context without a carbon price.

So let's be clear. This isn't a perfect bill. What we should have is a national electric vehicle strategy that incentivises uptake, not a Commonwealth vacuum and ad-hoc state taxes. At the last election, the Greens had a clear policy that outlined steps the government could still take:

 Fast track the roll-out of charging infrastructure;  Legislate tougher vehicle pollution standards;  Setting clear electric vehicle targets, to provide incentives for manufacturers; and,

 Significantly reducing the cost of electric vehicles, not increasing them.

In the interim, this bill provides a clear route for the Commonwealth to undo the state taxes on electric vehicles, ensuring that state governments don't impose them unfairly, at exactly the wrong time, when we need to be encouraging uptake of electric vehicles. Any state government that would impose an unfair tax on electric vehicles would lose a comparable amount of revenue, which would be distributed to other states on a per capita

4 Explanatory Memorandum, p. 3.

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basis. This is a basic step, to ensure we're not putting road blocks in front of electric vehicles.5

Background 1.8 During the second half of 2020, a number of state jurisdictions either made announcements or indicated they were actively considering introducing a tax on EVs. As these vehicles consume no petrol and thus pay no fuel excise,

the tax is intended to make them contribute to the cost of maintaining the road network in the same way that drivers of petrol and diesel vehicles do.

1.9 In November 2020, it was announced in the South Australian Government's budget proposal that owners of electric vehicles would pay a fixed annual levy on top of their registration as well as a distance-travelled charge.6

The government is intending to introduce a road user charge for plug-in electric and zero emission vehicles. The charge will include a fixed component (similar to current registration charging) and a variable charge based on distance travelled.7

1.10 The Victorian Government is also seeking to introduce a tax on electric vehicle drivers of 2.5 cents per kilometre for full electric vehicles, while plug-in hybrid vehicles would face a usage tax of 2.0 cents per kilometre travelled.8 The tax is reportedly similar to the South Australian version.9

1.11 The New South Wales (NSW) Government is reported to be also considering the idea:

[NSW Treasurer] Mr Perrottet has indicated he wants to take a plan over an electric vehicle tax to cabinet in coming months. He said he was grappling to find a sensible policy solution that would generate revenue for road maintenance in the future without impeding the growth of the industry.10

5 Senator Janet Rice, Senate Hansard, 10 December 2020, pp. 7544-45.

6 Rob Margeit, 'South Australia to apply road tax to electric vehicles, other states may follow',

Car Advice, 11 November 2020, https://www.caradvice.com.au/900290/south-australia-to-apply-road-tax-to-electric-vehicles-other-states-may-follow/, (accessed 22 February 2021).

7 State Budget 2020-21, South Australian Government, https://statebudget.sa.gov.au/budget-docs/2020-21_state_budget_overview.pdf, p. 26, (accessed 22 February 2021).

8 Rob Margeit, 'Victoria to tax electric and plug-in hybrid vehicles from 2021', Car Advice,

21 November 2020, https://www.caradvice.com.au/903101/victoria-to-tax-electric-and-plug-in-hybrid-vehicles-from-2021/, (accessed 22 February 2021).

9 Paul Sakkal, 'Labor’s electric vehicle tax set for a rough road ahead', The Age, 30 January 2021,

https://www.theage.com.au/national/victoria/labor-s-electric-vehicle-tax-set-for-a-rough-road-ahead-20210129-p56xw8.html, (accessed 22 February 2021).

10 Tom Rabe and Peter Hannam, 'We've got to be bullish': NSW ministers at odds over electric car

tax', Sydney Morning Herald, 29 November 2020, https://www.smh.com.au/national/nsw/we-ve-got-to-be-bullish-nsw-ministers-at-odds-over-electric-car-tax-20201128-p56irz.html, (accessed 22 February 2021).

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1.12 In contrast, the Australian Capital Territory (ACT) Government is offering zero-interest loans to help subsidise new and used electric vehicle purchases.11

Human Rights Implications: 1.13 The EM argued that the bill does not engage any of the applicable rights or freedoms and concludes that the bill is compatible with human rights as it does not raise any human rights issues. 12

Financial impact 1.14 The EM provided no assessment of the bill’s financial impact.

Regulation Impact Statement 1.15 The EM provided no regulation impact statement.

Conduct of the inquiry 1.16 The committee advertised the inquiry on its website and wrote to relevant stakeholders and interested parties inviting written submissions by 4 March 2021.

1.17 The committee accepted and published 22 submissions, which are listed in Appendix 1.

1.18 The committee held one public hearing in Melbourne on 22 April 2021. The names of witnesses who appeared at the hearings can be found in Appendix 2.

Acknowledgments 1.19 The committee thanks all individuals and organisations who assisted with the inquiry, especially those who made written submissions and participated in the public hearing.

Notes on references 1.20 In this report, references to the Committee Hansard are to the Proof Hansard and page numbers may vary between Proof and Official Hansard transcripts.

11 Peter Brewer, 'Zero-interest loans coming for ACT electric car buyers', Canberra Times,

16 November 2020, https://www.canberratimes.com.au/story/7007002/zero-interest-boost-for-electric-cars-in-canberra/ (accessed 22 February 2021).

12 Explanatory Memorandum, p. 5.

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Chapter 2 Views on the bill

2.1 The committee accepted and published 22 submissions to the inquiry.

2.2 This chapter will examine the themes expressed in those submissions and concludes with the committee’s reflections and recommendations.

2.3 The chapter will begin by reviewing the Victorian Government's arguments for the introduction of its tax.

The Victorian Government's position 2.4 The Victorian Government, in its submission to the inquiry, argued that whatever revenue it was receiving from its new tax, it has more than put back into transitioning Victoria's car fleet to Electric Vehicles (EVs):

The states and territories that are introducing, or considering introducing, distance-based charges for [Zero and Low Emissions Vehicles] ZLEVs are investing in support programs for ZLEVs at a cost far in excess of the revenue that will be generated from these charges over the short-term.

The Andrews Government’s current funding commitments to support the uptake of ZLEVs are already 50 per cent above the expected revenue received from distance-based charges over the first three years of the scheme.1

2.5 The Victorian Government went on to argue that the bill as it stands will penalise those states and territories seeking to raise the revenue to address barriers to the uptake of EVs, including addressing concerns about those vehicles' range.2

2.6 Moreover, the Victorian Government did not believe it premature to introduce such a tax at this time, believing it necessary for the long term sustainability of road construction and maintenance funding:

Governments need to be forward-thinking to address structural changes in road-related revenue bases and the resulting long-term financial sustainability challenges for state and territory road networks.

The Andrews Government's modest distance-based charge for ZLEVs registered in Victoria, to commence on 1 July 2021, will ensure motorists contribute their fair share to the cost of funding Victorian roads and road-related infrastructure.

1 Victorian Government, Submission 21, p. 2.

2 Victorian Government, Submission 21, p. 2.

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It will improve the financial sustainability of Victoria’s road network and ensure we can continue to invest in our transport networks into the future.3

Revenue implications of EV uptake 2.7 Despite arguments from proponents of the taxes on EVs that they are necessary to combat revenue loss, evidence provided by the Electric Vehicle Council indicated that EV uptake provides a net revenue benefit to

government:

Recent analysis from EY commissioned by the Electric Vehicle Council has quantified the net benefit of electric vehicles in Australia, where the average net benefit to government and society of an electric vehicle replacing an internal combustion engine vehicle is $8,763.4 This includes higher tax revenue from electric vehicle sales today, due to their comparatively higher upfront cost.4

2.8 The modelling provided to the Committee estimated specifically that "the costs and benefits of an ICEV being displaced by an EV … is an increase in net revenue of $0.011/km"5 in direct government impacts, even before considering the benefits associated with reduced emissions, health impacts, reduced noise pollution, and other factors.

Support for the bill's intent 2.9 There was a high degree of support from the submissions received for the bill’s ultimate intent--the encouragement of the uptake of EVs in Australia. Submitters argued against the imposition of a new tax specifically aimed at

EVs as it would be a disincentive for people who wished to buy the vehicles.

2.10 For example, Hyzon supported the bill as it stands as a means to oppose any state-based actions to introduce discriminatory taxes and charges on electric vehicles,6 as did Evie Networks.7

2.11 There was also in-principle support from Federal Chamber of Automotive Industries (FCAI) to the introduction of taxes which could hinder the uptake of EVs:

The FCAI supports the goal of the bill to prevent the States erecting roadblocks to the uptake of Zero and Low Emissions Vehicles (ZLEVs).8

2.12 This sentiment was also expressed by RAC Western Australia:

3 Victorian Government, Submission 21, p. 2.

4 Electric Vehicle Council, Submission 4, p. 4.

5 Electric Vehicle Council, Submission 4, Attachment 1, p. 6.

6 HYZON, Submission 6, p. 2.

7 Evie Networks, Submission 8, p. 1.

8 Federal Chamber of Automotive Industries, Submission 19, p. 1.

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RAC broadly supports the COAG Reform Fund Amendment (No Electric Vehicle Taxes) Bill 2020's general intention of deterring state governments from introducing state-based road user charges which could act as a road block to the uptake of EVs.9

2.13 Dr Jake Whitehead was also critical of state governments seeking to introduce such taxes:

Several State Governments have recently announced plans to introduce electric vehicle (EV) taxes from mid-2021. While details on the final designs of the schemes may change, initial reports suggest a 2.5 cent per kilometre charge will be introduced in some jurisdictions, strictly applied only to EV owners. In some cases there may also be a fixed cost component in addition to the per-kilometre fee.

Unfortunately, these State Governments have not recognised that higher taxes will lead to lower EV sales, as is the case when any additional tax is applied to a product or service. Additionally, these jurisdictions have not released detailed modelling to quantify the impact of their proposed EV taxes on market adoption, emissions and other economic effects.10

2.14 The Electric Vehicle Council also argued against the introduction of taxes which would inhibit uptake of EVs:

Various state governments' intention to introduce a new tax on electric vehicles is premature and will stifle Australia's transition to zero emissions vehicles. The lack of policy support for electric vehicles has already caused Australians to miss out on many electric vehicle models and for Australia to be a global laggard in electric vehicle uptake.11

Reservations about the bill's methods 2.15 Despite the in-principle support, a number of submitters argued that the bill in its current form was not the best way to pursue support for the uptake of EVs.

2.16 Infrastructure Partnerships Australia argued that the rights of states to levy their own taxes and charges would effectively be overridden by this bill:

The principal concern is that the bill as drafted would effectively nullify the constitutional right of a state to raise a revenue against the use of its assets by removing that from the GST distribution that would be allocated to the state at a commensurate amount. That's a pretty strong overreach of the central government's power and would actually have very little material impact on getting reform done. It seems to me that if we think at a national level we want to encourage reform and if the constitutional right to levy the charge lies with the state then we should be encouraging the states to do that reform, not penalising them when they do.12

9 RAC, Submission 15, p. 4.

10 Dr Jake Whitehead, Submission 2, p. 1.

11 Electric Vehicle Council, Submission 4, p. 1.

12 Mr Adrian Dwyer, Chief Executive Officer, Infrastructure Partnerships Australia,

Committee Hansard, 22 April 2021, p. 7.

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2.17 RAC Western Australia argued for a holistic approach to the question of road use and revenue:

A state-based, piecemeal approach will not provide a solution to the projected decline in fuel excise revenue and risks further complicating the progression of national reform of road user charging in Australia…

To respond to issues associated with declining fuel excise revenue and the need for a more equitable, efficient and effective funding model, RAC supports consultation on, and development of, a new road user charging model encompassing all vehicles and considering the holistic impacts of road use to replace the array of existing fees and charges used to generate revenue. This should occur only as part of a genuine national reform of taxation on road users and be informed by a rigorous cost-benefit analysis of all social, economic and environmental impacts.13

2.18 The FCAI, in their submission, also supported a consistent and national approach to the question of excise and road user charges:

The FCAI recognises that the decline in fuel excise, the taxation of motorists and their vehicles, is a long-term issue that needs to be addressed. We also understand that road user charging should play a role in Australia’s future tax regime. However, such a transition needs to be undertaken in a holistic and nationwide manner, recognising the importance of [Zero and Low Emissions Vehicles] ZLEV's. The FCAI encourages the Commonwealth and State and Territory governments to develop a RUC that is nationally consistent, broad based, technology neutral and replaces inefficient Commonwealth and State taxes - not take the easy path of punishing ZLEVs.14

2.19 During the public hearing, the FCAI continued on the same theme:

I think it's really important that there is a nationally consistent approach adopted by all the states. The last thing we would want is another railway gauge issue in this country.15

2.20 The Australian Automobile Association (AAA) expressed similar views:

AAA suggests the committee should not be making policy decisions of this magnitude until the Parliament has had a comprehensive debate about, and has a clear understanding of, land transport funding reform including:

 a pathway for structural reform of the nation's transport taxation and funding arrangements  the medium- and long-term implications of the declining revenue base from fuel excise  how to introduce a fair and equitable distance-based road user charging

system that does not disincentivise the uptake of [ultra-low fuel consumption vehicles] ULFCVs, and

13 RAC, Submission 15, pp. 4-5.

14 Federal Chamber of Automotive Industries, Submission 19, p. 2.

15 Mr Tony Weber, Chief Executive, Federal Chamber of Automotive Industries, Committee Hansard,

22 April 2021, p. 36.

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 how revenue and expenditure from the introduction of state-based road user charges on ULFCVs will be treated as part of existing arrangements.

A piecemeal approach such as that proposed in the bill will exacerbate rather than address the underlying issues that flow from an unfair, inequitable and flawed land transport funding model.16

2.21 Finally, the Australian Logistics Council expressed their disappointment with the current and proposed mix of legislation and how it impacts negatively on business:

…so much of the regulatory framework that impacts on businesses is designed and enforced at a State or local level. For those operating businesses in the freight logistics sector, this means daily confrontation with a hodgepodge of legislative and regulatory hurdles that variously confound and complicate the process of transporting freight safely and

efficiently.

ALC is disappointed that Australia is at the precipice of such disorder.

Victoria has announced the introduction of a 2.5 cent per kilometre levy on electric vehicles, following an earlier decision made by South Australia.

The ACT appears to be mooting an 'opt in' distance charge whilst the NSW Government appears uncertain.

It is disappointing that a simple and nationally consistent Federal fuel excise regime is at risk of ultimately being replaced with another complex set of charges administered at the state and territory level.17

Committee comment 2.22 The committee notes the consistent support for EVs through most of the submissions received. With currently only a 1 per cent take-up rate, there is a general consensus in those submissions that more could be done to

encourage Australian consumers to purchase EVs. The idea of imposing a tax specifically on EVs has met with significant opposition.

2.23 The committee acknowledges that there is a certain logic to the proposals being put forward by the Victorian and South Australian Governments. That is, if EV drivers are not contributing to road construction and maintenance through the excise currently levied on petroleum products, then a new tax specific to EVs could make up the shortfall.

2.24 The committee shares the concerns of many submissions that what is being proposed in this bill is unlikely to produce an optimum result. Allowing the creation of a further set of inconsistent rules is unlikely to benefit anyone and, as it stands, this bill does not facilitate a consistent national approach

16 Australian Automobile Association, Submission 14, p. 8.

17 Australian Logistics Council, Submission 11, pp. 2-3.

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regarding EV taxes and charges. The committee is of the view that this could be an item for consideration by the National Federation Reform Council.

2.25 Despite some support demonstrated for the bill's intentions, the committee shares the view of those submitters who argued that the bill as it is currently structured is not ideal and may cause more problems than it solves. Accordingly, the committee is of the view that the bill should not be passed.

Recommendation 1

2.26 The committee recommends that the bill not be passed.

Senator Slade Brockman Chair Liberal Senator for Western Australia

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Additional comments - Labor Senators

1.1 Labor is committed to the transition to an effective, long term, national Electric Vehicle (EV) strategy that incentivises the uptake of EVs through such initiatives as the reduction in import tariffs and fringe benefit taxes, and support for the development of key related Australian manufacturing and supply chains. Labor is committed to working with industry, unions, states and consumers to develop this strategy.

1.2 As part of this commitment to an EV strategy, Labor believes measures should be taken to look at encouraging Australian manufacturing of EV components and possibly even cars. The Commonwealth should also look at how its existing investment in infrastructure across Australia could be used to increase the availability of charging stations and other EV infrastructure. Labor also believes that a coherent and sustainable national EV strategy must address the long-term implications of declining fuel excise revenue.

1.3 Labor Senators noted from the evidence in submissions to the committee’s inquiry, from the subsequent hearing witnesses, and the committee’s report, that the absence of leadership from the Morrison government is detrimental to Australia’s economic, environmental, social, and international interests.

1.4 The Federal government has also been 'missing in action' on the issue of ongoing funding of infrastructure through various funding models (such as a road user charges) and still has no comprehensive plan, leaving other branches of government to step up to address the lack of a national approach on these issues. In the absence of Federal government leadership on this issue, Australians with less fuel-efficient vehicles are being penalised disproportionately through the fuel excise.

1.5 Labor Senators maintain that changes to the GST formula and distribution needs careful consideration and consultation, and that the proposed bill would inhibit future arrangements.

Senator Anthony Chisholm Senator Jess Walsh

A/Deputy Chair Member

Labor Senator for Queensland Labor Senator for Victoria

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Dissenting report - Senator Rex Patrick

21st Century Mixed Gauge Muddle

Introduction 1.1 I thank the Committee and the Secretariat for the work it has done in relation to this inquiry and thank the people and organisations that made submissions.

1.2 Sadly the Morrison Government is totally lost when it comes to Electric Vehicles (EVs). It is often said that history repeats. That's certainly the case here, where Australia’s faces a shambles that can be compared to the long delay in standardisation of railway gauges in Australia. There are still people in the South Australian township of Peterborough that remember the mixed gauge muddle of the seventies when the town serviced no less than three different gauge rail lines: narrow, standard and broad gauge rail.

1.3 Absent a promised National Electric Vehicle Strategy, states are going it alone on EVs. This bill seeks to un-muddle some of the muddle and should be supported.

Effects of the bill 1.4 It does not make sense for penny poor state governments to discourage the take up of EVs at this point in time, just to try to fill their coffers. The bill sensibly removes any financial incentive from states and territories seeking to

impose a road user tax on EVs by reducing grants by an equivalent amount or obtaining equivalent compensation through the COAG Reform Fund.

1.5 It also seeks to avert a mishmash of different taxes across jurisdictions.

1.6 This bill does not, and cannot, resolve the overarching issue of not having a national solution to transition to a future transport solution that is properly planned and implemented. But the bill is a step in the right direction and should be supported.

Where's the vision? Look in the rear view mirror! 1.7 The Morrison Government has no 'vision' of what Australia’s transport mix should look like in the future and what needs to happen around that to ensure the nation has been future-proofed, but at the very least is future ready. It's

highly concerning and unacceptable.

1.8 The Bill must be viewed in the broader context, and that is to address a symptom of the Federal Government failing to have a National Strategy for Electric Vehicles; a strategy that should deal with the ongoing introduction

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and uptake of EVs, provide the guidance to the population, industry and the states and provide a common agenda across the country.

1.9 There is a statement in project management that is highly applicable to this situation, "Fail to Plan, Plan to Fail". Right now there are so many aspects of the transport transition where the Government has conspicuously failed to plan. The absence of planning is already having a negative effect. Vehicle manufacturers are withholding some of their EV models from the Australian market. The private sector is hesitant to invest. The national EV charging network is not progressing as it should be. We have states rolling out road user taxes for EVs. Aussies interested in owning and operating EVs are reticent to make the investment and the situation is worse for heavy vehicle operators such as bus companies.

1.10 The commencement of the EV road user tax in Victoria on 1 July 2021 is the first real life example of inconsistently applied road user taxes. South Australia had signalled its intent to follow suit.

1.11 The need for a national strategy and approach was an underlying sentiment echoed across the majority of the submissions and this should not only be reflected in the report, it should be highlighted.

1.12 The inescapable reality is that EVs are the future transport solution; overseas manufacturers are openly stating they're moving in that direction and have been for a number of years. Australia no longer has a local car industry that could manufacture internal combustion engine powered alternatives. It's not like Australia has a viable alternative to EVs.

1.13 Australia is on a journey to net zero carbon emissions by 2050. The Morrison Government claims the pathway will be through "technology, not taxes". EVs are a technology that must be part of the journey, yet the Federal Government's standing by and allowing states to impose taxes on that technology, a clear disincentive. It would also, as the Electric Vehicle Council explained, make Australia the first country in the world to discourage EV uptake. This not a category we want to be first in.

Where has the money gone? 1.14 The fuel excise is the largest source of road related revenue, it is also well recognised that the fuel excise is not just spent on roads, it covers far more government expenditure. Another fact is that it is in decline and it has been

for some time. This trend will continue and as more EVs get on the road, the rate of decline will accelerate. This reduction in fuel excise revenue will negatively impact the Federal Government’s bottom line, forcing a cut in spending or initiation of a new tax on something else.

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1.15 The Federal Government do need to have a plan for dealing with the lost fuel excise revenue, but that can’t include a road user tax on EVs. As a disincentive to EV take-up, the imposition of such a tax at this time is short-sighted policy.

Committee recommendation 1.16 The report has one committee recommendation, "that the bill not be passed". It is a recommendation consistent with the Morrison Government’s approach of "let's do nothing". This is not acceptable.

1.17 The report fails to properly represent the underlying view of the majority of those that made submissions or appeared before the inquiry.

1.18 The report should also recommend the Government urgently develop and publish a National Strategy for EVs. We would be foolish indeed if Australia decided to repeat the colonial experience of differing railway gauges with this new and critically important transport technology.

Recommendation:

 this bill should be supported; and

 this weekend the Prime Minister should read the 2019 Select Committee on Electric Vehicles report, and especially my additional comments. I can assure him that doing so won't ruin his weekend.

Senator Rex Patrick Member Independent Senator for South Australia

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Dissenting report - Australian Greens

1.1 In January 2019, the Senate Select Committee on Electric Vehicles provided an extensive list of recommendations on how to increase the uptake of electric vehicles (EVs).1 Despite subsequently committing to a national EV strategy, the Commonwealth Liberal government has comprehensively undermined action on EVs, including attacks during the 2019 election that were subsequently shown to be unsupported.2

1.2 In the absence of the needed Commonwealth leadership, state governments have taken steps to introduce additional taxes on EV, that would further hinder the uptake of EVs, and slow the urgent action we need on emissions to address the climate crisis.

The urgency of reducing emissions 1.3 As highlighted by the Australia Institute in their submission, transport emissions are an important and growing contributor to the climate crisis:

Transport is one of the fastest growing sources of emissions in Australia, increasing by 62.4 per cent in March 2020 from 1990 levels, and makes up almost a fifth of our national emissions profile. The National Energy Emissions Audit found transport emissions have already rebounded after dipping during the pandemic.3

1.4 If Australia is to meet its international commitments, and reduce emissions to the level required, it will require nationally coordinated action to reduce emissions:

Achieving the goals of the Paris Agreement requires steep reductions in emissions across all sectors. Decarbonising the transport sector must be a national priority, backed by policies to increase the uptake of electric vehicles.4

1 Senate Select Committee on Electric Vehicles, Report, 30 January 2019,

https://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Electric_Vehicles/ElectricVe hicles/Report, (accessed 6 May 2021).

2 Michael Mazengarb, 'Morrison government finally admits there will be electric utes, and EVs can

tow caravans', 25 May 2020, The Driven, https://thedriven.io/2020/05/25/morrison-government-finally-admits-there-will-be-electric-utes-and-evs-can-tow-caravans/, (accessed 6 May 2021).

3 Australia Institute, Submission 18, p. 4.

4 Australia Institute, Submission 18, p. 6.

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Additional benefits from electric vehicles 1.5 In addition to the need to reduce emissions, EV uptake provides a range of other benefits, as highlighted by evidence to the committee. EV generate higher levels of revenue to governments, despite arguments to the contrary:

Recent research from EY commissioned by the [Electric Vehicle Council] EVC demonstrates that the argument that electric vehicles are causing a decrease in tax revenue is unfounded. In fact, today electric vehicles create upwards of $8,700 in net benefits, while consumers pay more in tax than a comparable internal combustion engine vehicle.5

1.6 EVs also provide health benefits to the broader community, and reduce fuel dependency:

The accelerated adoption of electric vehicles (battery and plug-in hybrid electric) would provide enormous social, economic, and environmental benefits for Australia. Today, they are already a cleaner form of transport than internal combustion engines, and, as our energy mix continues to decarbonise, provide the only pathway to a zero-emission transport future. They reduce our reliance on imported oil and will improve urban amenity as they are quieter and do not pollute local communities.6

Australia in the international context 1.7 The lack of action by the Commonwealth government has meant that Australia lags dramatically behind its international peers. As the Australia Institute summarised:

Australian EV uptake is low compared to global uptake. For the year 2020, EVs (battery and plug-in electric vehicles) accounted for 0.7 per cent of new vehicle sales, compared to the global average of 4.2 per cent. In Norway, where ambitious public policies promote EV uptake, 75 per cent of new car sales are EVs.

Australia’s poor EV uptake is largely due to the lack of polices encouraging the transition to EVs. The Bloomberg G20 Zero-Carbon Policy Scoreboard report assesses the decarbonisation policies implemented by G20 countries. For road transport policies, Australia ranks third last, ahead of only Saudi Arabia and Russia—two of the world’s largest oil exporters. Australia’s score of 27 per cent is well below the top score of 80 per cent for France, Germany, and China— countries that have implemented robust policies to drive EV sales.7

1.8 Similarly, the EVC noted a number of countries and other jurisdictions that have committed to clear timeframes to phasing out internal combustion engines (ICEs).8 Many other countries offer clear upfront incentives to a value

5 Electric Vehicle Council, Submission 4, p. 1.

6 Electric Vehicle Council, Submission 4, p. 2.

7 Australia Institute, Submission 18, p. 7.

8 Electric Vehicle Council, Submission 4, pp. 6-7.

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of A$5,000 equivalent or significantly higher, to encourage EV purchases.9 As the EVC noted in evidence to the committee:

In 2020 electric vehicle sales made up 0.75 per cent of all new vehicles sales. In Australia we sell sub one million new vehicles each year—69,000 of those were electric vehicles. If we compare ourselves to markets like the UK or the EU more than 10 per cent of their sales were electric. Leaders like Norway—of course, 75 per cent of their new sales are electric. Even in a global average sense, so including undeveloped and Second World nations, in terms of all new vehicles sales sold right around the world 4.2 per cent of all new vehicles sales were electric.10

The Commonwealth's failure to act 1.9 A fundamental cause for Australia’s poor uptake of EVs is the lack of a coordinated strategy by the Commonwealth government to drive urgent, rapid uptake of EVs. As Australia Institute witnesses noted:

Unfortunately, electric vehicle policy at the federal level is severely lacking. The recently released Future Fuels Strategy, in place of a dedicated electric vehicle strategy, contains no new funding commitments and, disappointingly, rules out policies that work—like purchase incentives for EVs, fleet procurement targets and vehicle CO2 standards. These policies have not only been shown to work in overseas markets but have also been highlighted by the government funded Australian Electric Vehicle Market Study as levers that would drive uptake of EVs in Australia. The lack of federal policy support for easy uptake has led to perverse policy outcomes at the state level… 11

Australia was promised that strategy two years ago. We were meant to have an electric vehicle strategy at the federal level but it has been consistently delayed and has now turned into the Future Fuels Strategy, which, as we said in our opening remarks, leaves a lot to be desired in terms of those incentives. We're really not seeing those policies coming through in that strategy… What we are missing now is the federal leadership to actually address Australia's latent interest in electric vehicles and help correct it by putting in place incentives that lower the sticker price so everyday Australians can benefit from this technology…12

1.10 In turn, that failure by the Commonwealth government has made Australia a dumping ground for dirtier, more polluting vehicles from manufacturers, who prioritise their zero or low emissions vehicles (ZLEVs) for other jurisdictions with stronger incentives and policies. Combined with the announcement of unnecessary state taxes, this reduces the incentives for manufacturers to bring

9 Electric Vehicle Council, Submission 4, pp. 7-8.

10 Mr Behyad Jafari, Chief Executive Officer, Electric Vehicle Council, Committee Hansard,

22 April 2021, p. 22.

11 Ms Audrey Quicke, Researcher, Climate and Energy Program, The Australia Institute, Committee

Hansard, 22 April 2021, p. 17.

12 Ms Audrey Quicke, Committee Hansard, 22 April 2021, pp. 17—18.

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affordable EVs to Australia, making it harder for community members to access affordable EVs.

1.11 As the Federal Chamber of Automotive Industries noted in their submission:

The contradiction by state governments of setting net zero targets and then putting in a RUC [Road User Charge] that disincentivise the take up of ZLEVs is confusing for our member companies and extremely difficult to explain to their global headquarters …

The combination of these mixed signals being sent by Australian state governments combined with other countries competing for the allocation of vehicles results in automakers prioritizing the allocation of ZLEVs vehicle production for sale in countries other than Australia.13

1.12 Similarly, Nissan noted:

The transition to EVs is still in the early stages and requires support for Australia to catch up to the pace of adoption with other OECD nations. Taxes specifically targeting electrified powertrains will have significant negative impact on the technology uptake in Australia by impacting both customer demand and ultimately prioritisation of global allocation of new technologies.14

Proposals for state taxes 1.13 The Australian Greens support comprehensive transport pricing reform that ensures a just and sustainable transport system, with support for low income households, and a sustainable pricing system. However, the proposals put

forward by state governments will have profoundly problematic impacts on EV uptake when it is crucial that EV uptake is encouraged, to address the climate crisis. As outlined above, a vacuum in Commonwealth policy has resulted in fragmented, disjointed proposals by state governments.

1.14 One of the key proponents of the proposal, Infrastructure Partnerships Australia, has described itself variously as an ‘independent think tank’,15 but also as a ‘peak body for the national infrastructure sector’.16 IPA’s membership includes major toll road companies, and they have previously made political donations to major parties.

1.15 Throughout evidence to this inquiry, and in a range of other contexts, a wide range of stakeholders have raised profound concerns about the state government proposals, particularly when adopted in an ad-hoc approach, without a national plan to encourage EVs with significant incentives. An open

13 Federal Chamber of Automotive Industries, Submission 19, p. 1.

14 Nissan Australia, Submission 20, p. 1.

15 Infrastructure Partnerships Australia, Submission 9, p. 1.

16 Infrastructure Partnerships Australia, Annual Report 2020.

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letter from 25 organisations,17 including environmental groups, car manufacturers, Doctors for the Environment Australia and others criticised the Victorian state government’s tax as the 'worst in the world', as the only tax that specifically applies to EVs and not to other vehicles. The letter states:

No other jurisdiction has introduced such a targeted levy on the cleanest vehicles on the road without significant incentives to balance it out. Most industrialised countries are prioritising incentives for electric vehicles to benefit from cleaner air and new jobs from a growing industry. This new

tax means the world’s manufacturers are far less likely to send Victorians their best, most affordable, zero emissions vehicles. That makes things much harder for Victorian families who want to buy and drive electric. Every other state and territory in Australia has ruled out or delayed plans for a premature new tax on electric vehicles. Going it alone will mean Victoria has the worst electric vehicle policy in the world. While the Victorian Government is pushing ahead with an EV tax, it has delayed setting emission reduction targets for 2030, including a target for the transport sector. Members of Parliament, please vote against this EV tax and vote for cleaner Victorian roads and stronger climate action. Victoria, don’t pull the handbrake on electric vehicles.18

Impacts on consumer uptake of EVs 1.16 These state taxes, particularly if imposed in a policy vacuum at the national level, will have devastating impacts on the uptake of EVs. Professor Jake Whitehead, of the University of Queensland, summarised his research on

the impact of state EV taxes:

The introduction of the proposed EV taxes risks pushing Australia even further into the wilderness in terms of EV uptake …

State governments that introduce EV taxes without any significant financial incentives for households and businesses to purchase these vehicles, are highly unlikely to meet their own emissions targets, and will rob Australia of the economic benefits that this technology transition can deliver. As such, the Australian Government should penalise jurisdictions that implement these punitive actions against Australians who have already purchased an EV, or are looking to do so…19

We found that if a 2.5 cent per km EV tax was introduced, the consumer would see this as being equivalent to approximately a $4,500 increase in the vehicle’s purchase price. In other words, for a $45,000 EV, the proposed EV road tax is predicted to have an effect approximately

17 Annika Smethurst and Michael Fowler, 'State’s electric vehicle scheme 'world’s worst'', The Age,

22 April 2021, p. 1.

18 See the advert at: https://australiainstitute.org.au/wpcontent/uploads/2021/04/5bEMBARGOED5d-AGE-EV-tax.pdf (accessed 6 May 2021).

19 Professor Jake Whitehead, Submission 2, p. 1.

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equivalent to an additional 10 per cent tax, or doubling the current GST rate, in terms of consumer perception…20

We found that if a 2.5 cents/km EV tax was to be implemented nationally it could result in the share of electric vehicle sales being as low as 30-40 per cent by 2050. In other words, over the next 30 years, these proposed EV taxes could result in 35-68 per cent lower sales, or 4.9 to 9.5 million fewer EVs being sold in Australia.21

1.17 The Australian Electric Vehicle Association, representing the interests of EV owners, provided clear evidence that the increased tax would create a significant additional barrier at the key point of purchase:

We have already had feedback from a wide range of people who have openly said, 'Well, if it's going to be taxed extra then I'm not going to make the move.' We know from an international perspective—and I know you will have some other witnesses speaking—that one of the key things is to get a range of vehicles available here in Australia to make that change. That is also not going to happen when we're sending out signals to industry that we're going down this path.22

The COAG Reform Fund Amendment (No Electric Vehicle Taxes) Bill 2020 1.18 The COAG Reform Fund Amendment (No Electric Vehicle Taxes) Bill 2020 was introduced to prevent the imposition of state taxes that will create a

roadblock to EV uptake. As summarised in the explanatory memorandum:

This bill seeks to neutralise the revenue effect of states and territories that legislate discriminatory taxes or charges against the purchase and use of electric vehicles. The bill will also financially reward states and territories that don’t place such road blocks to electric vehicle uptake by redistributing the money withheld from noncomplying states and territories.

This bill will insert a statutory condition on grants of financial assistance to the states and territories from the COAG Reform Fund, that will provide that a jurisdiction with a discriminatory charge against electric vehicles will either have their grants reduced in the following financial year by the amount raised from such taxes and charges in a given financial year or will be required to pay back to the Commonwealth an amount of the grant equal to the amount raised from such taxes and charges.23

1.19 A number of witnesses noted that in the vacuum created by the absence of Commonwealth policy, and facing the prospect of additional barriers to EV

20 Professor Jake Whitehead, Submission 2, p. 1.

21 Professor Jake Whitehead, Submission 2, p. 3.

22 Mr Chris Nash, President, Australian Electric Vehicle Association, Committee Hansard,

22 April 2021, p. 13.

23 Explanatory Memorandum, p. 3.

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uptake from state taxes, the bill was an appropriate response to encourage EV uptake:

1.20 The Australia Institute:

The No EV Tax Amendment neutralises the revenue effect of state-based RUCs for EVs. This discourages states and territories from introducing perverse and targeted RUCs, but does not impede the future introduction of equitable road user charging systems based on best- practice rather than political expedience. To do this, the federal government should take the lead on developing a comprehensive policy for funding transportation.24

1.21 Professor Jake Whitehead:

I strongly urge the Australian government, including Senators considering this bill, to lead on the development of a fair, transparent, future road pricing scheme that does not unfairly penalise EV ownership. The Australian government should ensure that any state government that introduces additional taxes on EVs, without significant financial incentives, is held accountable and penalised—as one such mechanism to do so is presented in the bill this committee is considering.25

1.22 Hyundai Australia:

HMCA supports the COAG Reform Fund Amendment (No Electric Vehicle Taxes) Bill 2020 as a federal response to address in the state-based actions to introduce discriminatory taxes and charges on electric vehicles…. HMCA supports a level playing field approach…. (and) a patchwork approach state by state will lead to inconsistency and confusion for consumers with some technologies unfairly penalised.26

1.23 RAC:

RAC broadly supports the COAG Reform Fund Amendment (No Electric Vehicle Taxes) Bill 2020’s general intention of deterring state governments from introducing state-based road user charges which could act as a road block to the uptake of EVs.27

1.24 AGL:

We support the view in this Bill that Australia will be best served by a national electric vehicle strategy. With the comparatively small market that exists in Australia, the introduction of short-sighted and ad-hoc taxes will stunt the development of this emerging industry and leave Australia well behind other developed nations.28

24 The Australia Institute, Submission 18, p. 17.

25 Professor Jake Whitehead, Submission 2, p. 7.

26 Hyundai Australia, Submission 10, p. 1.

27 RAC, Submission 15, p. 4.

28 AGL, Submission 5, p. 2.

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Recommendations:

 that the bill be passed;

 that state governments not proceed with discriminatory taxes on EVs; and

 that the Australian government introduce a national strategy to urgently increase the uptake of electric vehicles.

Senator Janet Rice Greens Senator for Victoria

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Appendix 1

Submissions and additional information

1 Ms Helen Moss 2 Dr Jake Whitehead 3 Mr David Arthur 4 Electric Vehicle Council

 Attachment 1  Attachment 2

5 AGL Energy

6 Hyzon Motors 7 Mr James Koerner 8 Evie Networks 9 Infrastructure Partnerships Australia 10 Hyundai Australia 11 Australian Logistics Council 12 Renewable Energy Policy Group 13 Australian Electric Vehicle Association 14 Australian Automobile Association 15 RAC

 Attachment 1

16 Citizens' Climate Lobby Australia 17 EV Alliance 18 Australia Institute 19 Federal Chamber of Automotive Industries 20 Nissan Australia 21 Victorian Government 22 Northern Territory Government

Answer to Question on Notice 1 Federal Chamber of Automotive Industries (FCAI); Answers to questions on notice from the public hearing in Melbourne on Thursday, 22 April 2021 (Received 30 April 2021).

2 Federal Chamber of Automotive Industries (FCAI); Attachment 1 to answers to questions on notice from the public hearing in Melbourne on Thursday, 22 April 2021 (Received 30 April 2021).

3 Federal Chamber of Automotive Industries (FCAI); Attachment 2 to answers to questions on notice from the public hearing in Melbourne on Thursday, 22 April 2021 (Received 30 April 2021).

26

4 Federal Chamber of Automotive Industries (FCAI); Attachment 3 to answers to questions on notice from the public hearing in Melbourne on Thursday, 22 April 2021 (Received 30 April 2021).

5 Federal Chamber of Automotive Industries (FCAI); Attachment 4 to answers to questions on notice from the public hearing in Melbourne on Thursday, 22 April 2021 (Received 30 April 2021). 6 Infrastructure Partnerships Australia (IPA); Answer to a question on notice

from the public hearing in Melbourne on Thursday, 22 April 2021 (Received 3 May 2021).

Tabled Documents 1 Infrastructure Partnerships Australia; Opening statement from the public hearing in Melbourne on Thursday, 22 April 2021. 2 Australian Electric Vehicle Association; Opening statement from the public

hearing in Melbourne on Thursday, 22 April 2021. 3 Australia Institute; Opening statement from the public hearing in Melbourne on Thursday, 22 April 2021. 4 Electric Vehicle Council; Opening statement from the public hearing in

Melbourne on Thursday, 22 April 2021. 5 Australian Logistics Council; Opening statement from the public hearing in Melbourne on Thursday, 22 April 2021. 6 Federal Chamber of Automotive Industries; Opening statement from the

public hearing in Melbourne on Thursday, 22 April 2021. 7 Nissan Australia; Opening statement from the public hearing in Melbourne on Thursday, 22 April 2021.

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Appendix 2 Public hearing

Thursday, 22 April 2021 Rydges Melbourne 186 Exhibition Street Melbourne

Infrastructure Partnerships Australia  Mr Adrian Dwyer, Chief Executive Officer

Australian Electric Vehicle Association  Mr Chris Nash, President

Australia Institute  Mr Ritchie Merzian, Director, Climate & Energy Program  Ms Audrey Quicke, Researcher, Climate & Energy Program

Electric Vehicle Council  Mr Behyad Jafari, Chief Executive Officer

Australian Logistics Council  Ms Rachel Smith, Director, Policy & Advocacy  Mr Kerry Corke, Policy Consultant

Federal Chamber of Automotive Industries  Mr Tony Weber, Chief Executive  Mr Rob Langridge, Director, Emerging Technologies  Mr Matt Hobbs, Director, Policy & Advocacy

Nissan Australia  Mr Ben Warren, National Manager, Electrification and Mobility