Replacing Gas Tax in a Mandated EV World

All levels of government in Canada collect around $20 billion in taxes on gasoline and diesel sales per year.  The present government in Ottawa hopes to ban the sale of […]
Published on September 15, 2023

All levels of government in Canada collect around $20 billion in taxes on gasoline and diesel sales per year.  The present government in Ottawa hopes to ban the sale of internal combustion vehicles by 2035.  There are many practical reasons this will not happen but this unlikely event would leave a massive hole in governments’ budgets.

At the moment, there is no separate tax on EVs to make up the shortfall in revenue (except in Saskatchewan, which charges an annual EV registration fee of $150 – expected to offset all lost revenues on provincial gas tax). It is only a matter of time before some form of taxation on EVs will be introduced by both the Federal Government and all Provincial Governments.

It will be difficult to tax EVs on usage as to be accurate, governments would need to impose universal tracking systems, which would calculate tax due, depending on which jurisdiction you drove, and how far you travelled (think of a road trip from Kenora to Arizona where each state and province charges its own EV tax). To think through the complexities of such a system is mind blowing.  Even if a simple annual odometer reporting was required to register a vehicle, and a tax charged based on distance travelled, it would require a whole new reporting system.  How to collect taxes from cars when they leave the province, are wrecked, people who move away, false reporting, people who die, are incarcerated, or simply default, etc.

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Assuming that EVs should be fully taxed to pay for road construction and repairs, how should we tax EVs in the future?

 

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