The rise of electric cars poses an increasingly significant fiscal problem for the government: the more the car fleet abandons gasoline and diesel, the more fuel tax revenue is expected to decrease. This situation is now leading to discussions about new methods of taxing motorists, including a contribution calculated based on the number of kilometers driven. This approach is being considered to prepare for a post-gasoline and post-diesel era, while the United Kingdom has already decided to take this step. While the French government is encouraging drivers to switch to electric cars, with subsidies available, the backlash could therefore be severe in the coming years.
Billions of euros in revenue set to disappear
The problem is considerable for French public finances. Taxes paid when filling up with gasoline or diesel have been a major source of revenue for decades. However, with the gradual electrification of the vehicle fleet, this revenue stream is bound to decrease. The government has already estimated that the drop in TICPE (domestic tax on petroleum products) revenue by 2030 due to this transformation of the vehicle fleet will amount to €13 billion. In the longer term, the widespread adoption of electric vehicles raises a simple question: how will the billions currently collected on each liter of fuel be replaced when motorists no longer buy them? Taxing the electricity used to charge cars is one possibility, but it presents an obvious difficulty when charging takes place at home. Taxing the actual use of the vehicle is another option.
The UK will tax electric cars per kilometer from 2028
This is precisely the solution adopted across the Channel. Starting in April 2028, the United Kingdom will apply a new tax to electric cars, directly linked to mileage. The announced rate is 3 pence per mile for 100% electric vehicles and 1,5 pence per mile for plug-in hybrids. Converted to kilometers, the British levy represents approximately 2 euro cents per kilometer for an electric car, depending on the exchange rate. For a driver covering around 11,000 kilometers per year, the additional cost would thus be around a few hundred euros annually. The British objective is explicitly fiscal: to recoup some of the revenue set to disappear with the decrease in gasoline and diesel consumption. The measure is expected to generate approximately £1,4 billion.
In France, no such tax has yet been adopted.
The British precedent naturally fuels questions in France. Several publications, however, present the creation of a French kilometer tax as practically a done deal. This is not yet the case. French vehicle taxation already includes various levies related to registration, weight, and emissions, but the current official system does not include a national tax charging individuals for each kilometer driven in an electric car. The question of its potential creation could nevertheless become more important as fuel revenues decline.
A tax headache with the gradual disappearance of thermal power
The problem extends far beyond France. For decades, governments were able to finance part of their spending by directly taxing fuel: the more a vehicle was driven and consumed, the more taxes its owner indirectly paid. Electric vehicles are disrupting this system. Drivers can now charge their vehicles at home using the same electricity they use for heating, appliances, or lighting. A mileage-based tax could circumvent this difficulty by basing the tax on the distance traveled rather than the energy consumed. However, it would immediately raise questions about mileage verification, reporting procedures, and the differences between drivers depending on their place of residence or travel needs.
A sword of Damocles for electric car owners
French drivers who currently own electric vehicles do not yet have to pay any new kilometer tax. The question is: for how long? It's a real sword of Damocles hanging over all those who have succumbed to the allure of electric vehicles…
Community
Comments
Write a comment
Be the first to comment on this article.