Electric Cars Will Make Britain Poorer – Where’s The Tax Money Going To Come From? – Forbes

Posted: Saturday, July 29, 2017

We have a useful reminder that electric cars aren’t going to be quite the economic saviour some seem to think. For the current system of fossil fuel use adds near £30 billion a year to the government’s tax collections. Electric cars are only even potentially cheaper than fossil fuel powered if the power is untaxed, or at least untaxed at these levels. All of which means that if the fleet is to be largely electric then the government is going to be looking around for some other form of tax revenue to cover that gap.

Sure, we might hope that government will simply spend £30 billion a year less–gurgle, snort, splort, we now return you to reality–but we know that’s not going to happen. So, what will happen is that we’ll be paying something like the amount we do now for our transportation, plus another £30 billion in tax somewhere or other to maintain the amount of government we’ve got. That therefore means we’re going to have £30 billion less of the things we might prefer other than transport and government–we’re worse off by that amount.

This is indeed what is going to happen too:

The switch to electric cars poses a big financial problem for the government – because every time a driver switches from a petrol or diesel car to an electric vehicle, the government loses 57.95p per litre in fuel tax at every fill-up.

In total, duties on petrol and diesel add up to almost £28bn a year for the exchequer. Worse for the chancellor of the day, petrol and diesel sales make a contribution to VAT. VAT is charged at 20% of the wholesale price plus the duty, which equates to 16.7% of the final price. That’s a form of double taxation and explains why more than 65% of the cost at the pumps goes to the exchequer.

An electric car charged from the grid will currently generate just 5p in VAT for every pound spent. If the car is charged directly from solar panels on a garage roof, the Treasury is likely to go empty-handed.

As we know very well that’s just not going to happen is it, the Treasury going empty handed? Sadly, absolutely none of the analyses of the costs and or benefits of electric cars manage to contain or explain this thorny little problem. They’re either going to be more expensive than fossil fueled, as a result of the tax which needs to be added, or we’re going to be paying more tax elsewhere. For the one thing we know we’re not going to get is less government.


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