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Think-tank urges rethink on taxation for electric cars to protect public finances

By Tom Gibson | June 2, 2023

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Regit has been asking for clarity on this issue since 2020 to prevent a tens of billion pounds loss to the public purse

Think-tank urges rethink on taxation for electric cars to protect public finances

Electric car owners should be charged tax in a pay-per-mile system to plug an estimated £28bn hole in public finances.

Leading think-tank, The Resolution Foundation has said a new ‘road duty’ should be brought in that would charge electric-only vehicle drivers 6p per mile.

The aim is to prevent an estimated £28billion hole emerging in the public purse due to a fall in fuel duty receipts as drivers make the switch to electric.

Although quite how an unfamiliar pay-per-mile system would sit with electric drivers is debatable at best and would be at serious risk of simply adding another barrier to adoption.

Under the plans, the road pricing system would be tracked via GPS systems fitted in new electric cars, meaning extra charges could be added automatically for driving in congestion zones.

Although, given it relies on an electronic device, Regit wouldn’t be surprised if device tampering would risk unravelling the system before it’s taken off.

The Government takes in around £28billion a year from the fuel duty that is charged when people refuel with petrol or diesel. The tax helps to pay for schools, hospitals and other public services. 

A further £7billion is collected in road tax, from which electric cars are currently exempt, to help maintain our roads - but they will start paying the levy from April 2025.

Jonny Marshall, senior economist at the Resolution Foundation, said: ‘Our tax system needs to keep pace with the electric vehicle transition, in a way that protects low and middle-income households.’

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