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Victoria suggests higher registration costs or national charge could replace struck down EV tax

Victoria suggests higher registration costs or national charge could replace struck down EV tax

Victorian treasurer Tim Pallas says the government will consider refunding a tax paid by electric vehicle owners after the high court deemed it invalid, but suggests registration costs could rise or a national levy could be implemented in its place.

The high court on Wednesday ruled in favour of two electric car drivers who argued the imposition of the Victorian tax, charged per kilometre ​driven, was unconstitutional because the states do not have the power to impose such excise taxes on consumption.

On Thursday, Pallas said the landmark decision could lead to constitutional challenges to other state taxes including car registration, waste levies and on gaming, threatening both revenues and the federal-state relationship.

“It is a nervous time for the federation,” Pallas said.

“The high court has reimagined the constitution, they have upturned 50 years of interpretation of what constitutes an excise.

“We’re going to have to look at which taxes may be impacted, and we’re going to have to think about whether or not there is legislative responses to secure the state’s revenue base or indeed whether there is a role for the commonwealth to play in order to do that.”

He said the government was receiving legal advice on whether it would have to refund affected electric vehicle drivers. In the last financial year, the government raised $3.9m from the tax, and less than $10m since 2021.

“I don’t think the government is particularly phased with the fact that we might have to return a small amount of money,” Pallas said.

Justice Jayne Jagot, one of the judges in the majority for the 4-3 decision, said the Victorian charge was invalid because it was “a tax, not a fee for service”.

“It is not a licence or permit fee for an activity properly the subject of a regulatory scheme,” she said.

The comments raise the prospect that it might be possible for states to raise revenue from electric vehicles if the charge were structured differently, such as an additional charge on car registration.

Pallas confirmed that adding charges to car registration could be a possible workaround.

“Yes, it could be,” he said. “Although, we’ve got to now start to think about what this decision actually means to the broader interpretation that the majority of the high court have taken.”

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“It could well mean that we’ll have to totally recast the way that we raise revenue in this state, if the commonwealth are heading down this path, but at the moment let’s not get too far ahead of ourselves.”

The high court decision will likely prevent New South Wales and Western Australia from proceeding with plans to introduce their own road-user charges for electric vehicle drivers from 2027.

On Wednesday the NSW premier, Chris Minns, told parliament the ruling “has caught everyone by surprise” and could wipe “billions” from the state’s revenue if it is applied to other levies.

Minns said such charges “generated not just hundreds of millions of dollars, but billions of dollars” for the NSW treasury. It was an “extremely complex ruling”, but at this early stage there were “different readings” of its impacts, he said.

In its submissions to the court, Victoria had argued that other charges could be challenged on the same basis.

These include “duties on the transfer or conveyance of goods … motor vehicle duties and vehicle registration charges, commercial passenger vehicle levies, gaming machine levies and ‘point of consumption’ betting taxes and waste disposal levies”, according to Jagot.

Justice James Edelman, a judge in the minority, said there was now “serious doubt” over whether states can levy taxes on gifts or inheritance, some payroll and industrial land taxes, licences to carry on a business, taxes on carrying goods, or on the “ownership, possession, use, or destruction of goods”.

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