Finance Finance News ‘Cash grab’: Victorian drivers mount High Court challenge over electric vehicle tax

‘Cash grab’: Victorian drivers mount High Court challenge over electric vehicle tax

electric vehicle tax
Victorian Treasurer Tim Pallas is facing a court challenge to his controversial EV tax. Photo: AAP
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The Victorian government is facing a High Court challenge to its electric vehicle tax, with two disgruntled drivers arguing it is unconstitutional.

Documents filed in Australia’s highest court on Thursday claim Victorian Treasurer Tim Pallas doesn’t have the authority to levy a 2.5 cent tax on every kilometre driven by electric vehicle (EV) users across the state.

The controversial policy, which was passed into law in May and began on July 1, has ignited a chorus of critics who argue it is reducing uptake of low-emission vehicles and undermining the state’s climate targets.

Mr Pallas claims the tax is needed so that EV drivers pay their fair share towards road maintenance. He says the support the state has given to the industry outweighs the cost of the tax.

Victoria is the first state to impose a road-user charge for EV drivers but other states, including South Australia and NSW, have plans to bring in their own.

Lawyers will now look to stop those plans in their tracks by asking the High Court to determine whether Victoria – and by extension other states – can levy the taxes under Section 90 of the Australian Constitution.

Step backwards on climate: Plaintiffs

Engineer Kathleen Davies, one of the two plaintiffs listed on court filings, said the tax is bad policy and represents state government overreach.

Ms Davies drives a hybrid, which is being taxed at 2 cents per kilometre under the new laws.

“Not only do I think it’s unconstitutional and grossly unfair, it’s actually going to send us further backwards on climate change,” she told TND.

“If you tax EVs, you’re going to make it more expensive and people less likely to want to buy one.”

Kath Davies says Victoria’s electric vehicle tax is a step backwards on climate change. Photo: Supplied

The second plaintiff, Chris Vanderstock, drives an EV and says the tax is punishing people for addressing the environmental costs of transport.

“I can fill my car up mostly from my solar panels at home,” he told TND.

“Transport is more than 20 per cent of our emissions. If everyone can electrify their transport, we’ve solved one of our biggest problems.”

Australia’s uptake of EVs is lagging behind other high-income countries and researchers have blamed a “patchwork” of government policies.

Ms Davies and Mr Vanderstock are being represented by Equity Generation Lawyers, a firm making a name for itself by suing big business and Australian governments over climate change issues.

The firm successfully represented a group of teenagers in May, resulting in a court ruling the government has a legal duty not to cause harm for young people when approving coal mining projects.

‘Rushed tax cash grab’

Equity Generation associate Jack McLean, who will argue the latest EV case, said the legal and political arguments for Victoria’s tax were flawed.

“The Andrews government is imposing a rushed tax cash grab on EVs that will see Australia and Victoria left behind,” Mr McLean told TND.

“It makes EVs less affordable. It ends up being about a $5000 tax over the life of a car … I’d be adding that to the sticker price.”

Section 90 of the Constitution stops state governments from imposing any tax that can be considered a custom or excise.

Lawyers will argue the electric vehicle tax falls into this category, but the argument is untested.

“We’ll be arguing the state of Victoria doesn’t have the power needed to implement this tax,” Mr McLean said.

“The court hasn’t had a chance to consider this specific legal question in a number of decades.”

Challenge ‘unlikely to succeed’

But according to Anne Twomey, a professor of constitutional law at the University of Sydney, the bid is “unlikely to succeed” unless the plaintiffs can convince the court to overrule previous authorities.

Professor Twomey said Section 90 prevents states from imposing excise taxes, but not consumption taxes.

“The Victorian electric vehicle charge appears to be a classic consumption tax, because it is taxing the use of vehicles (i.e. their consumption),” Professor Twomey told The New Daily.

“The High Court, in a case called Dickenson’s Arcade Pty Ltd v Tasmania in 1974 held that such a consumption tax is not an excise.”

Professor Twomey added that the High Court also more recently refused a request to appeal a case from the Federal Court in 2000 over a ruling that a consumption tax was not an excise.

Victoria claims tax is fair

The Victorian government has sought to defend the tax by comparing the cost for EV owners to the cost of fuel excise tax for internal combustion engine motorists.

The Commonwealth government is responsible for collecting fuel excise.

The state government has argued drivers of petrol cars pay $600 a year on average while the EV tax will charge the average motorist just $300 per year.

But Mr McLean said this comparison is misleading, as the federal government levies fuel excise on petrol cars, not state governments.

“It’s quite clear the federal government has the constitutional authority to levy that tax,” he said.

“What’s not clear is whether Victoria has the constitutional authority to implement the tax on the consumption of electric vehicles.”

Mr Pallas has argued the money raised from the tax will fund roads and EV charging infrastructure projects carried out by the state government.

These reforms ensure all motorists pay their fair share to use our roads while we continue to incentivise [EVs],” Mr Pallas said in March.

But Mr McLean said petrol car users do not pay taxes to directly fund state government road projects.

“Fuel excise revenue goes into a consolidated revenue fund, then it gets carved up and money gets granted back to the states,” he said.

“It’s no more true to say that fuel excise pays for road infrastructure than it is to say GST pays for road infrastructure.”

The New Daily has sought comment from the Victorian government.