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New Rolls-Royce Electric Car Heralds UK Tax Disaster

March 2, 2011

The news yesterday of BMW owned luxury car maker Rolls-Royce’s unveiling of its new electric car at the Geneva Motor Show heralds an era of fundamental change to UK tax laws. At 0-60mph in 8 seconds, a 100mph top speed and 125-mile range the new vehicle will cost 2p per mile to run [40p for a conventional Rolls-Royce Phantom] but takes 20 hours to charge its 96 lithium-ion battery cells on a household electricity supply: ROLLS Royce has unveiled its first electric car – a Phantom EX102 at the powerful price of £1MILLION The Sun Wednesday, 2 March 2011

Other car makers have also been unveiling new models at the show.  The Engineer reports:

BMW, Land Rover and Rolls-Royce all showed off their latest alternative-powertrain concept cars, while Nissan premiered a fully electric sports car that can achieve 0 to 100km/h in less than five seconds.

While none of the cars are scheduled to go on sale yet, their design marks a shift towards the mainstream for electric vehicles.

Geneva Motor show highlights battery and hybrid electric cars 2 March 2011 | By Stephen Harris

So what does this mean for tax? If the fuel cost drops from £0.40 to £0.02, then the tax and duty revenue loss to the government will be substantial.  Using the 2010 consumption figures from the Office for National Statistics for petrol and diesel estimates of 17 and 24 billion litres respectively can be calculated.  With VAT and duty running at £0.80 per litre on current pump prices, this translates into a total government revenue of £33bn.  If all vehicles were electric instead and saved as much as a Rolls-Royce electric Phantom EX102 does then government revenue would have fallen 95% to £1.65 billion.  This would leave government with a shortfall of nearly at least £31.5bn per annum [in fact much more – as electricity supplies are not taxed on the same basis as petrol and diesel].

TAX IMPLICATIONS

Government cannot offset this by putting up electricity prices.  That would be a politically impractical move because it would hit the poorest, including those on benefits, hardest whilst paying for the rich to ride around subsidised by the majority.  It might require all electric vehicle owners to have a separate charging meter in their homes or garages.  They would then be required to make a return of annual mileage compared to electricity usage on their meters to make sure they were paying the correct amount.

Another approach might be to leave the electricity supply side as it is but instead have a meter built into each vehicle so that a road tax could be levied on annual or monthly mileage.

The most likely scheme will be a scheme which taxes road usage on a pay-per-mile basis, perhaps  with a device in each vehicle linked to a tracking system via the mobile telephone network.  Whatever happens, the motorist will and has to eventually pay as electric cars become more common.

The alternative of course is to stop Government spending money.  That will never happen.

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