Germany is facing new financial challenges due to the increase in electric vehicle sales. According to Jens Boysen-Hogrefe, a tax and transport expert at the Kiel Institute for the World Economy, people are gradually moving away from fossil fuels such as gasoline and diesel.
Increase in Electric Vehicle Sales
Sales of electric vehicles in Europe in the first quarter of this year have increased by nearly 30 percent compared to the same period last year. Norway is leading in this regard, with electric vehicles accounting for 95 percent of new car registrations in the country. According to the International Energy Agency (IEA), the growth of electric vehicle sales in Asia-Pacific countries, excluding China, has been even higher, with some regions seeing increases of up to 80 percent. In Latin America, this figure is around 75 percent.
Tax Implications and Challenges
However, in Berlin, this boom in electric transport has not been met with public enthusiasm. The German Ministry of Finance is concerned about the decline in energy tax revenue, as charging electric vehicles is only subject to a low electricity tax and energy tax does not apply to them. Currently, a liter of diesel in Germany has a tax of 47.04 cents and a liter of gasoline has a tax of 65.45 cents. Given that gasoline prices reach €2.10 per liter, taxes account for more than half of the pump price going to the government.
Tax experts warn that if changes are not made to the tax system, the transition to electric vehicles could result in a loss for the government. Boysen-Hogrefe predicts that if this trend continues, the government may face a decline in revenue of billions of euros. Revenue from energy taxes on diesel and gasoline has decreased from €37 billion in 2016 to €33 billion last year. A report forecasts that this revenue could drop to €5 billion by 2050.
Thus, the transition to electric vehicles has significant tax implications that have been less addressed so far. Additionally, the government currently provides financial incentives for purchasing electric vehicles, but these incentives will continue only until the end of 2023. Electric vehicles will be exempt from vehicle tax until 2035, and companies investing in this area will benefit from tax advantages.
Experts recommend that the government should not wait until the tax shortfall reaches a point where action is necessary. They emphasize that the time required for these measures may span several legislative periods.
In other countries such as the UK and Norway, measures have been taken to address this new situation. In the UK, a tax on electric vehicles will be implemented starting April 2028. Additionally, New Zealand and Iceland will require annual mileage checks for electric vehicles starting in 2024 to calculate distance-based costs.
In Germany, many experts are calling for the introduction of a tax on passenger vehicles to compensate for the shortfall in energy tax revenue. They suggest that a distance and traffic-based tax could be an efficient option.
