EV pay-per-mile tax could cost more than it’s meant to raise

The proposed pay-per-mile tax on electric vehicles could cost the UK economy up to £4.8 billion, the Government has been warned.

UK trade association BEAMA described the Electric Vehicle Excise Duty (eVED) as a “fiscal own goal” that will cost the UK economy more than it will raise in tax revenue.

The body, which represents manufacturers in the electrotechnical sector, has joined forces with ChargeUK, REA and EVA England to call for a pause on the tax’s introduction and further investigation into its impact.

It says that in the worst-case scenario if the eVED is introduced in 2028 it will cost up to £4.8bn in lost sales and company costs, against projected tax income of around £4.3bn by 2031.

This is based on a similar pay-per-kilometre policy introduced in New Zealand, which led to a 50% decline in EV sales.

The planned eVED would see EV owners charged 3p per mile on top of the £200-per-year standard VED already applied. The Office for Budget Responsibility estimates it will cost a driver covering 8,500 miles per year an additional £255 annually.

Vicky Edmonds, CEO of EVA England said the existing proposals “risk leaving EV owners out of pocket and eroding confidence amongst those thinking about making the switch to electric”.

The £4.8bn figure is based on companies and drivers putting off purchasing an EV without buying a petrol or diesel equivalent. Even if drivers do opt for a combustion-engined alternative, the research suggests losses of £630 million in lost VAT receipts and £260 million in compliance for car leasing companies.

The coalition has written to Daniel Tomlinson MP, Exchequer Secretary to the Treasury, calling for the eVED to be delayed until 2030, when pure petrol and diesel sales are set to be banned.

Matt Adams, head of electrical transport systems at BEAMA said delaying to 2030 could provide “essential stability”. He noted: “Introducing the pay-per-mile policy early is a fiscal own goal. It will slow EV uptake, reduce EV charging investments, and cost the UK economy more than the Treasury stands to raise with the taxation.

Mark Constable, head of transport policy, at green economy trade association REA said the current policy “is simply not fit for purpose”, while Jarrod Birch, head of policy at ChargeUK called it “another contradiction at the heart of government’s EV policy”.