The Tax Revenue Challenges Of Electric Cars
Friday, 31. August 2018
OK, I have this great new way of charging you for the electricity that you use. In future, you will be assessed by the amount of hot water you use per annum. The more hot water you use the more you will pay for your electricity. As a result, the Government will expect you to use less water and less electricity to heat the water. Makes sense?
Probably a bit of a silly example but the point is that linking the two items doesn’t seem like an obvious way for you to pay for your electricity. You pay for electricity as you use it – seems like a bloody obvious thing to do! So what’s this got to do with cars?
Well, a lot of what we spend on roads and the roads infrastructure is collected in various taxes. First Registration, Road Fund Licence and Fuel Excise Duties being the three main ones that come to mind (congestion charging, scaled parking charges are others). So how do we work out the charge? We charge based on CO2 emissions! No allowance for other emissions just CO2.
It just doesn’t make sense and even with the CO2 emissions, it’s simply assessed on how much comes out of the exhaust pipe over a kilometre. I might be travelling just 5,000 miles a year in a relatively high CO2 emitting vehicle but still pay more in RFL than someone travelling 40,000 miles a year in a car with CO2 emissions that are slightly lower. Again – makes no sense! What does make sense is charging per mile for the use of our roads – a bit like using electricity!
And that is what will have to be considered if we move over to either very low emission hybrids or zero-emission electric cars. To leave things as they are will mean drivers will pay nothing towards the upkeep of our roads infrastructure. So the first out of the blocks is the Republic of Ireland, working on a scheme whereby drivers pay to use roads by the mile in order to fill what could potentially be a fairly large black hole in the finances.
Our government is keeping an eye on what the Irish are proposing, to see if theirs is a model we should copy. Transport Secretary, Chris Grayling, announced earlier this year that whilst he acknowledged that many people felt that pay per mile was the way forward he had no immediate plans to change from the current method of funding our roads.
Unfortunately rather short sighted! Having said that I’m not sure how we would go about collecting the data and making the charges on motorists. By Graham Hill
