Norway ‘Tesla Tax’ could have big EV impact as Ireland incentive fails to go far enough

19 October 2017

Norway’s new Government wants to lessen the impact of subsidies and tax breaks for electric vehicles (EVs) on the country’s budget by introducing a one-off tax on vehicles weighing more than two tonnes.

Norway is a leader in EV uptake, with around 35% of new cars sold in the country having some form of plug-in electrification, while the Government there has a target for all cars to be zero emission by 2025.

However, much of this adoption has been built around a program of subsidies to make current EV models affordable to buy. Price parity with standard models may not come until 2030 according to various manufacturers, meaning the country will have to find a way of lessening the dent each EV sale makes in the budget.

According to media in the country, the Government is looking to introduce an €8,800 tax on the sale of EVs weighing over two tonnes, therefore affecting the heavy premium vehicles sold. Dubbed the ′Tesla tax’ as it will affect vehicles sold by the manufacturer, it is dividing public opinion. The Norwegian EV association has called the move a ′gamble for the whole EV market which will affect consumers,’ while some believe it will level the market by removing preferential treatment given to the vehicles.

However, the market is still growing in Norway, and is therefore still fragile. EVs in Norway are free from any purchase tax and the country’s 25% VAT rate. However, a proposal to raise their road tax while cutting it for petrol cars caused a crisis within the government in 2016. Any additional tax could push some consumers back to petrol or diesel vehicles, which would be considerably cheaper, and affect the country’s plans to be combustion engine free by 2025.

The plans are to be included in the country’s draft 2018 budget. However, in order to pass them, the new Government will need the support of other parties, which may not be forthcoming.

Meanwhile, Ireland is looking to introduce a 0% ′benefit in kind’ (BIK) for one year on company EVs. In its most recent budget, the country’s Government decided not to raise duty on diesel and did not include any further measures, good or bad, for motorists.

The Government estimates the cost of the BIK incentive at just €500,000. The Sustainable Energy Authority of Ireland (SEAI) already offers grants of up to €5,000 to people who buy electric cars, while a Vehicle Registration Tax (VRT) relief up to a maximum of €5,000 is also in place.

However, some believe the move is a small gesture that will not have a big impact on EV uptake amongst business drivers in the country.

′The idea to make electric cars exempt from Benefit in Kind tax for a year will make them more attractive for those who have company cars,’ Conor Faughnan, AA Ireland Director of Consumer Affairs, said. ′[It is] Not a bad idea, but not a big idea either. There were less than 400 electric cars sold last year and there are just over 1,800 electric cars in Ireland. In Norway the figure is 135,000. This modest measure will not do much to close that gap.’