The electrifying excision of an excise on electric vehicles - Vanderstock v Victoria

The electrifying excision of an excise on electric vehicles - Vanderstock v Victoria

23rd Nov 2023

‘Too much looking backward ... is bad for progress.’[1]

Henry Ward Beecher

On 18 October 2023, the High Court delivered its judgments in Vanderstock v Victoria [2023] HCA 30, which was heard over three days in February. The case raised an important issue. Under consideration was the ability of the states (here, the State of Victoria) to charge people to drive electric vehicles (EVs).

Given the importance of the case, the Commonwealth intervened in support of the individual plaintiffs and each of the other states and territories intervened in support of the State of Victoria. The Australian Trucking Association sought leave to be heard as a friend of the Court and was granted leave to file written submissions.

The question for the Court was:

‘Is s 7(1) of the Zero and Low Emission Vehicle Distance-Based Charge Act 2021 (Vic) invalid on the basis that it imposes a duty of excise within the meaning of s 90 of the Constitution?’[2]

The answer, by majority four to three, was ‘Yes’.

What’s this all about, then?

A few years ago, the Victorian Government legislated that people driving EVs in Victoria had to pay an amount each year to it, based on use of the EV, with a requirement to report one’s odometer to the state. That is, a per km charge for using an EV on Victorian roads was calculated and charged. If EV drivers did not report, they were required to pay considerable sums.

The plaintiffs in the case were Christopher Vanderstock (an EV owner) and Kathleen Davies (a Hybrid owner). Section 7(1) of the legislation required the registered operator of a zero or low emissions vehicle (ZLEV) to pay a charge for ‘use of the ZLEV on specified roads’[3] (the ZLEV charge). ‘Specified road’ was defined under the legislation to include, in effect, all public roads in Australia.

The ZLEV charge was determined annually at a prescribed rate for each kilometre travelled by the vehicle on specified roads during a financial year. For the 2021–2022 financial year, the prescribed rate was 2.5 cents for a ZLEV that is an electric vehicle or hydrogen vehicle, and 2 cents for a ZLEV that is a plug-in hybrid electric vehicle. The ZLEV charge was levied as a debt due to the State of Victoria by reason of the use of the vehicle in question.[4]

As with most matters before the High Court, the facts were agreed. Since it was the defendant’s legislation under scrutiny, I have set out a summary from the learned Solicitor General’s written submissions first:

‘10.       The ZLEV charge has several characteristics that make it markedly different to those charges previously held to be an excise (and therefore a tax on goods). First, the ZLEV charge is not imposed during the production process or at the point of sale, but on the user of the ZLEV substantially after the point of sale (ss 7(1), 11, 15 and 18). Second, liability to pay the ZLEV charge is assessed periodically over the duration of the ZLEV’s registration. Third, the amount payable is calculated not by reference to the value (or quantity) of the ZLEV, but by reference to the distance driven on “specified roads”. No charge will be payable in respect of a given year if a ZLEV is not driven on “specified roads” during that period (because it is not driven, or is only driven on roads that are not “specified roads”). A ZLEV that is only driven on private roads — for example, on such roads on agricultural properties or mining sites — will never incur the charge. A charge of this kind, imposed periodically after the point of sale and incurred only if a person engages in a specific activity involving use of the good, bears no resemblance to any charge previously considered by this Court to be a tax on goods, let alone an excise.

11.        Both the terms in which the ZLEV charge is imposed by the Act and the practical operation of the scheme also mean that it is not properly characterised as a tax on the use of a ZLEV. Rather, it is a tax levied upon the activity of driving a ZLEV on “specified roads” (ss 1 and 7(1)), calculated according to the number of kilometres the ZLEV is driven on such roads annually (ss 8(1), 11(3)(b) and 15(1)). As the ZLEV charge is not a tax on goods, it is not an excise.

12.        The matters raised by the plaintiffs and the Commonwealth do not detract from the characterisation of the ZLEV charge as a tax on an activity’.[5]

For these reasons, the defendant submitted that the ZLEV charge was a proper exercise of the powers of a state, that the charge was not an excise. It did not therefore impinge on the power reserved to the Commonwealth by s90 of the Constitution to make laws with respect to the imposition of excise. Ms Orr KC argued that the tax was on the ‘activity’ of driving an electric vehicle on a specified road rather than the consumption of goods, and therefore did not impose a duty of excise.

As set out above, the High Court, by majority, held that s7(1) of the Zero and Low Emission Vehicle Distance-Based Charge Act 2021 (Vic) is invalid. The plaintiff’s submissions, signed by Mr Merkel KC, were largely accepted by the majority. The Court reopened and overruled its decision in Dickenson's Arcade Pty Ltd v Tasmania (1974) 130 CLR 177, which held (by majority) that a tax on the consumption of goods does not constitute a duty of excise.

The Court held that an excise within the meaning of s90 is an ‘inland tax on goods’. The question of whether a tax is to be characterised as a tax on goods turns on whether, first, the tax bears a close relation to the production or manufacture, sale, distribution, or consumption of goods, and, second, whether the tax is of such a nature as to affect the goods as the subjects of manufacture or production or, as articles of commerce. The ZLEV charge was held to be a tax on goods because there is a close relation between the tax and the use of ZLEVs, and the tax imposed affects ZLEVs as articles of commerce, including because of the tendency of tax to affect demand for ZLEVs.

In simple terms, a tax can be an incentive or a deterrent. The ZLEV charge may have acted as a sufficient deterrent to the prospective purchaser of an EV so as to cause them not to buy one.

A good outcome for the planet, no doubt.

And so the position on this issue is now settled in Australia, for the time being. But it worth noting the dissenters – Gordon, Edelman and Steward JJ.

The dissent is strong, but Justice Edelman’s is particularly noteworthy: 

‘The extension of the essential meaning of an excise to a tax that has a reasonably anticipated economic effect on the pattern of demand, as was sought by the plaintiffs and the Commonwealth, involves a neglect of precedent. It means: Dixon J was wrong[1424]; Dixon CJ was wrong[1425]; Kitto J was wrong[1426]; Taylor J was wrong[1427]; Menzies J was wrong[1428]; Windeyer J was wrong[1429]; Owen J was wrong[1430]; Barwick CJ was wrong[1431]; McTiernan J was wrong[1432]; Walsh J was wrong[1433]; Gibbs J was wrong[1434]; Stephen J was wrong[1435]; Mason J was wrong[1436]; Jacobs J was wrong[1437]; Gibbs CJ was wrong[1438]; Wilson J was wrong[1439]; Brennan J was wrong[1440]; Deane J was wrong[1441]; Dawson J was wrong[1442]; Mason CJ was wrong[1443]; and McHugh J was wrong[1444]. That list can, after today, also include Gordon J, Steward J, and me' (at [651]).

The plaintiffs and, ultimately, the majority, approached the task of interpretation purposively. The word ‘excise’ has ‘never possessed, whether in popular, political or economic usage, any certain connotation and has never received any exact application’ (at [35]). Despite the lack of exact historical meaning, use of the word ‘excise’ historically has included a reference to a tax imposed on the consumption of goods. But we can be sure, for the time being, that it doesn’t include a charge to drive an EV.  

In a world blighted by war and political strife, it gives me a sense of quiet pride that our Constitution continues to be tested and that the rule of law that we agree to by living in this Country is given regular health checks.

To finish, as I began, with a quote from Beecher:

‘Liberty is the soul's right to breathe and, when it cannot take a long breath, laws are girdled too tight.’[6]

The ALA thanks Vaughan Hager for this contribution.

Vaughan Hager is a Melbourne based lawyer and principal of his own firm, Hager & Co. Mr Hager specialises in commercial disputes, insolvency, has a soft spot for defamation and is open to referrals. 





The views and opinions expressed in this article are the author's and do not necessarily represent the views and opinions of the Australian Lawyers Alliance (ALA).

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[1] Proverbs from Plymouth Pulpit, Ulan Press, 2012.

[2] Vanderstock v Victoria [2023] HCA 30 (Vanderstock).

[3] Ibid [167]

[5] Defendant’s Submissions, 24 October 2022, [10]–[12] <https://www.hcourt.gov.au/assets/cases/06-Melbourne/m61-2021/Vanderstock_Def.pdf>.

[6] Life Thoughts: Gathered From the Extemporaneous Discourses of Henry Ward Beecher, Forgotten Books, 2017.

Tags: Victoria Taxation Vaughan Hager electric vehicles zero or low emissions vehicle ZLEV charge hybrid vehicles