Electric vehicles tax waiver strikes a perfect balance
One of the key moves in last week’s budget speech concerned electric vehicles. Even Tesla Chief Executive Elon Musk had weighed in by calling Chief Executive Carrie Lam Cheng Yuet-ngor in the hope Hong Kong would restore the tax discount on EVs.
Until last year the heavy tax normally applied on all cars had been waived on EVs for years. This waiver significantly boosted the number of EVs on our roads — most of which are one particular luxury brand. Then, when the waiver disappeared in last year’s budget, almost doubling the price of this luxury EV, sales dropped dramatically.
With the revised waiver announced last week the government has perfectly tweaked the law, taking a middle of the road position. Effective immediately, buyers of new EVs can enjoy a tax break of as much as HK$250,000 but only if they replace their gas guzzlers with a new EV. Moreover, to avoid potential scamming of the system, the trade-in vehicle must be at least six years old and have been owned by the applicant for three years or more.
This tax break is significant and prescient. It especially encourages the purchase of new EVs that are relatively small in size. In effect, the government now recognizes that large EVs are not particularly responsible environmentally. Bigger vehicles take more resources to build.
For the sake of comparison, take an average mobile phone. We often hear about the waste created when we casually discard our phones after a couple of years; we are scolded by environmentalists for irresponsibly using resources. However, a phone weighs just 100 grams compared with a 2.5-ton EV. Resources used and waste created by an EV are many magnitudes greater. Yet, again, EVs seem to have a free pass from the public and media.
Arguments in favor of reapplying the tax waiver were highlighted numerous times in the media before the budget speech. The so-called “green” EVs, with no tailpipe emissions, are viewed as clean because they do not directly contribute to roadside air pollution. They are also viewed as the beginning of a trend which will eventually see all petrol and diesel vehicles disappear from our roads, perhaps within a couple of decades. As the argument goes, we have to start somewhere in order to build up the infrastructure for EVs, including charging stations. Despite continual criticism from EV owners about a lack of charging stations around the city the government has nevertheless certainly done its part by providing almost 2,000 of them. Somewhat unbelievably, electricity at these public stations is provided at no charge to these luxury car owners. In other words, the government actually provides free power to those who choose to lug themselves around the city in a 2 to 3 ton vehicle on our overcrowded roads.
In the end private vehicles, even small EVs, are simply not a good transport solution for Hong Kong. The city has one of the best public transport systems in the world. In many cases local trips by MTR can be done faster than a car, considering traffic jams and time spent parking. Thus, using our precious road space should be considered a luxury not a necessity, and taxed accordingly.
About 90 percent of our population manages to move around the city by MTR, bus and minibus, which further suggests private vehicles are not really necessary. In the meantime, the increasing number of vehicles, including EVs, simply adds to congestion and therefore pollution, which makes trips by the real environmentalists who take the bus both longer and unhealthier.
Practically speaking, however, we live in a free society, which includes freedom to purchase a vehicle and drive it on public roads. Therefore, the government can only use various incentives it has available to nudge the public in a sensible and eco-friendly direction. The newly implemented tax waiver strikes an appropriate balance, especially when it demands that an older vehicle with a tailpipe must be swapped for a new EV in order to benefit from the tax discount.