EU may exempt Electric Vehicles from VAT, should Australia remove the GST and LCT?

As countries around the world try to restart their economies, promoting sales of every kind of product is important, but electric vehicles represent a unique opportunity to not only...

As countries around the world try to restart their economies, promoting sales of every kind of product is important, but electric vehicles represent a unique opportunity to not only get the money coming in, but also meet key environmental policy objectives.

Overnight Bloomberg revealed part of draft legislation in Europe, that would see a significant change in the focus on EVs. This plan is big and bold and could spawn a tipping point for affordability in electric vehicles.

https://twitter.com/C_Barraud/status/1262761982983204864

It’s absolutely clear that electric vehicles are going to take over from ICE vehicles, they’re faster, quieter, have zero emissions and have much lower running costs, but the big stumbling cost is the price of admission – the up-front purchase price.

The European Union looks to be taking an all-electric future very seriously. In the draft EU document, sighted by Bloomberg News, the program would offer incentives to automakers to sell clean cars (EVs) and EV charging infrastructure.

EU-wide Purchasing Facility

The proposal may include a significant budget of 20 billion euros (A$33,411,300,000) for a purchasing facility for clean vehicles. That’s a massive number and the timeframe is aggressive with just 2 years to spend the money.

That timeline should scare a lot of automakers who are yet to get an EVs to market. It is unclear if the fund would be used to buy vehicles outright, like replacing the entire Government fleet, or if it’d offer a discount to any potential EV buyer. If the funding supports the later, it’s difficult to say what percentage we’d see available for each vehicle purchase.

The price difference between a traditional vehicle and an EV is largely a result of the biggest single cost in the vehicle, the battery. Those who want to buy an EV should not be responsible for the fact that’s a more costly component, so an incentive to remove this difference in price makes sense.

Clean Investment Fund

The next point is an interesting one. A Clean Investment Fund would spend 50-60 billion euros on accelerating investments in zero-emission drive trains. That sounds an awful lot like the EU wants to lead the world in the development of electric vehicles, not just cars, but vehicles of all descriptions and again, it’s a massive figure, however, this could be over a much longer timeframe.

2 Million chargers

If the incentives above succeed, the EU would see hundreds of thousands of electric vehicles hit the streets. This creates a demand for a comprehensive vehicle charging network.

This has a knock-on effect of creating additional jobs to design, build, install, and maintain as many as 2 million EV charging locations by 2025. It is possible that many of these charging locations become pay-to-play, which over time could pay back the investment.

No VAT on EVs

Now for potentially the most controversial part of the plan. Zero-emission vehicles (read: EVs), would be exempt from the Value Added Tax (VAT). Across the EU, the rate of VAT ranges between 19 and 27% on purchases.

The removal of that level of taxation on electric vehicles would be costly to the Government income, but is justified by bringing down emissions from the transportation industry.

Should Australia exempt EVs from GST and LCT?

Even though the legislation is only at a draft stage right now, there are so many vehicles made and sold in the EU, that this will make the world stand up and pay attention.

This proposal raises the question of what we should do in Australia. Currently we apply GST to vehicles of 10%. Given the higher price of EVs, many also attracts Luxury Car Tax, often resulting in thousands of dollars added to the purchase price, acting as a disincentive to buy EV.

I encourage Australian Governments at every level to consider a similar proposition to the EU. With a much smaller vehicle market, the incentives certainly wouldn’t be as expensive, however the principles behind them are as valid here as they are anywhere.

Australia wouldn’t need the drivetrain development, but would significantly benefit from discounting the purchase price of EVs. Simply put, the cheaper EVs are, the more people will buy them. I know from writing hundreds of articles about EVs that many people want to go EVs, but they’re simply out of reach, due to price.

More information via Electrek.

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Creator of techAU, Jason has spent the dozen+ years covering technology in Australia and around the world. Bringing a background in multimedia and passion for technology to the job, Cartwright delivers detailed product reviews, event coverage and industry news on a daily basis.
3 Comments on this post.

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  • elvis
    20 May 2020 at 3:42 pm

    Absolutely not. If you can’t afford an electric car, don’t put your hand in other people’s pockets. It used to be that people were ashamed to get welfare. And the emissions benefits are all fake anyway, your car is still powered from a power station. People are starting to wake up to how much they have been had by the global warming industry. Imagine if your power bills weren’t inflated by green handouts, you might be able to afford an electric car without asking for a handout…..

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    • Jason Cartwright
      20 May 2020 at 3:46 pm

      Doubt we’re going to convert you, but this change will happen over time, it’s a matter of how quickly. Given Australia doesn’t make cars, EVs are coming whether people like it or not. This I’d prefer they cost less, so more people could afford them and not have to buy an ‘in-between’ car to get them down the road a few years where their ICE car is worthless and they lose money in 2 transactions instead of one.

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  • accentcreate2017
    20 May 2020 at 5:25 pm

    Absolutely. Fossil-fuelled vehicles cause massive health issues, killing some seven million people per year, globally, through air pollution.
    A significant proportion of Australia’s balance of payments deficit is due to our importation of petroleum products, often from despicable regimes.
    To fast track a better Australia with clean air, reduced noise pollution and to improve our current account we certainly need to remove GST, LCB and reduce registration fees for electric vehicles.
    We also need to increase the excise on petrol and diesel, treating them in the same way as tobacco – a dangerous substance injurious to health.
    Even better, the Australian government should work with industry to develop an on-shore electric car manufacturing capacity. A first step would be to develop effective retrofit kits for existing cars. This already exists in Australia in a limited capacity and should be ramped up.

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